Source: http://www.oyez.org/cases/2010-2019/2011/2011_11_551
Timestamp: 2014-11-24 15:18:03
Document Index: 38931596

Matched Legal Cases: ['§106', '§450', '§450', '§450', '§450', '§1', '§450', '§450', '§450', '§1', '§450', '§601', '§701', '§450', '§450', '§1', '§450', '§450', '§450', '§450', '§450', '§1341', '§1304', '§450', '§7108', '§328', '§450', '§450', '§450', '§2008', '§256', '§450', '§1', '§450', '§450', '§450', '§450', '§450', '§450', '§450']

Salazar v. Ramah Navajo Chapter | The Oyez Project at IIT Chicago-Kent College of Law
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Docket No. 11-551 Petitioner Kenneth L. Salazar, et al. Respondent Ramah Navajo Chapter, et al. Decided By Roberts Court (2010- ) Granted Friday, January 6, 2012 Argued Wednesday, April 18, 2012 Decided Monday, June 18, 2012 Advocates
Mark R. Freeman(Assistant to the Solicitor General, Department of Justice, for the petitioner)Carter G. Phillips(for the respondent) Term:
Ramah Navajo Chapter Facts of the Case In 1975, the Indian Self-Determination and Educational Assistance Act (ISDA) became law. Among other things, the ISDA directs the Secretary of the Interior, at the request of any Indian tribe, to enter into contracts which permit tribal organization to administer federal programs that would otherwise be directly administered by the Secretary. The ISDA further requires the Secretary to pay the tribe's reasonable contract support costs, or the costs that the tribe would incur operating the program that the Secretary would not incur. The payment of these costs was made subject to the availability of appropriations, and Congress had imposed a statutory cap on the appropriations available to pay such costs. Ramah Navajo Chapter entered into multiple ISDA contracts for the administration a number of federally funded programs. The Ramah Navajo Chapter originally filed suit against the Secretary in 1990 on behalf of all BIA tribal contractors under the ISDA to challenge the methodology that Interior's Office of the Inspector General used to set indirect cost rates. In 1999 the district court granted the plaintiffs leave to add a new claim for the alleged underpayment of contract support costs due to insufficient appropriations. Both parties moved for summary judgment. The district court eventually granted summary judgment for the government, rejecting tribal demands for contract support costs in excess of the express statutory caps on the funds available to pay such costs. The tribes appealed, and the United States Court of Appeals for the 10th Circuit reversed. The appeals court held that the government could be required to pay all of the contract support costs requested by every tribal contractor, even in excess of the statutory cap, because Congress appropriated sufficient funds to satisfy the demands of any single contractor considered in isolation. The government appealed the appellate court's decision. Question Under the Indian Self-Determination and Education Assistance Act, is the government required to pay all of the contract support costs incurred by a tribal contractor, as mandated by the Act, if payment of those costs would exceed the express statutory cap on the appropriations available to pay such costs? Argument
Salazar v. Ramah Navajo Chapter - Oral ArgumentFull Transcript Text Download MP3Salazar v. Ramah Navajo Chapter - Opinion AnnouncementFull Transcript Text Download MP3 Conclusion Decision: 5 votes for Ramah Navajo Chapter, 4 vote(s) against
Legal provision: Yes. In a 5-4 majority opinion, Justice Sonia Sotomayor affirmed the Tenth Circuit decision. Despite the statutory cap within the ISDA, the government must pay each tribe’s support costs in full. The Court stressed that the government’s contractual obligation under the ISDA should be treated like any other contract. Even if a particular agency exhausts legally available funds that were originally appropriated to satisfy a particular contract, the government is still obligated to fulfill its entire financial obligation within the contract. The tribe was entitled to rely on the government’s promise of payment, rather than run the risk that the ISDA lump-sum appropriation may not cover the full cost of all contracts.
Chief Justice John G. Roberts, Jr. dissented, focusing on the current restrictions on governmental payment of support costs. Once the allocated funds were appropriated to the specific ISDA contracts, the money in the broader pool of funds became unavailable, relieving the government of any further contractual obligation. Since the situation in this case is hardly a typical government contracts case, it should not be resolved using typical contract principles. Justice Stephen G. Breyer, Justice Ruth Bader Ginsburg, and Justice Samuel A. Alito, Jr. joined in the dissent.
As originally enacted, ISDA required the Government to provide contracting tribes with an amount of funds equivalent to those that the Secretary “would have otherwise provided for his direct operation of the programs.” §106(h), 88Stat.
2211. It soon became apparent that this secretarial amount failed to account for the full costs to tribes of providing services. Because of “concern with Government’s past failure adequately to reimburse tribes’ indirect administrative costs,” Cherokee Nation of Okla. v. Leavitt, 543 U. S. 631, 639 (2005)
, Congress amended ISDA to require the Secretary to contract to pay the “full amount” of “contract support costs” related to each self-determination contract, §§450j–1(a)(2), (g).
The Act also provides, however, that “[n]otwithstanding any other provision in [ISDA], the provision of funds under [ISDA] is subject to the availability of appropriations.” §450j–1(b).
Congress included a model contract in ISDA and directed that each tribal self-determination contract “shall . . . contain, or incorporate [it] by reference.” §450l(a)(1). The model contract specifies that “ ‘[s]ubject to the availability of appropriations, the Secretary shall make available to the Contractor the total amount specified in the annual funding agreement’ ” between the Secretary and the tribe. §450l(c), (model agreement §1(b)(4)). That amount “ ‘shall not be less than the applicable amount determined pursuant to [§450j–1(a)],’ ” which includes contract support costs. Ibid.; §450j–1(a)(2). The contract indicates that “ ‘[e]ach provision of [ISDA] and each provision of this Contract shall be liberally construed for the benefit of the Contractor . . . .’ ” §450l(c), (model agreement §1(a)(2)). Finally, the Act makes clear that if the Government fails to pay the amount contracted for, then tribal contractors are entitled to pursue “money damages” in accordance with the Contract Disputes Act. §450m–1(a).
During Fiscal Years (FYs) 1994 to 2001, respondent Tribes contracted with the Secretary of the Interior to provide services such as law enforcement, environmental protection, and agricultural assistance. The Tribes fully performed. During each FY, Congress appropriated a total amount to the Bureau of Indian Affairs (BIA) “for the operation of Indian programs.” See, e.g., Department of the Interior and Related Agencies Appropriations Act, 2000, 113Stat.
1501A–148. Of that sum, Congress provided that “not to exceed [a particular amount] shall be available for payments to tribes and tribal organizations for contract support costs” under ISDA. E.g., ibid. Thus, in FY 2000, for example, Congress appropriated $1,670,444,000 to the BIA, of which “not to exceed $120,229,000” was allocated for contract support costs. Ibid.
Respondent Tribes sued for breach of contract pursuant to the Contract Disputes Act, 41 U. S. C. §§601–613, alleging that the Government failed to pay the full amount of contract support costs due from FY 1994 through 2001, as required by ISDA and their contracts. The United States District Court for the District of New Mexico granted summary judgment for the Government. A divided panel of the United States Court of Appeals for the Tenth Circuit reversed. The court reasoned that Congress made sufficient appropriations “legally available” to fund any individual tribal contractor’s contract support costs, and that the Government’s contractual commitment was therefore binding. 644 F. 3d, at 1063–1065. In such cases, the Court of Appeals held that the Government is liable to each contractor for the full contract amount. Judge Hartz dissented, contending that Congress intended to set a maximum limit on the Government’s liability for contract support costs. We granted certiorari to resolve a split among the Courts of Appeals, 565 U. S. ___ (2012), and now affirm.
In evaluating the Government’s obligation to pay tribes for contract support costs, we do not write on a clean slate. Only seven years ago, in Cherokee Nation, we also considered the Government’s promise to pay contract support costs in ISDA self-determination contracts that made the Government’s obligation “subject to the availability of appropriations.” 543 U. S., at 634–637. For each FY at issue, Congress had appropriated to the Indian Health Service (IHS) a lump sum between $1.277 and $1.419 billion, “far more than the [contract support cost] amounts” due under the Tribes’ individual contracts. Id., at 637; see id., at 636 (Cherokee Nation and Shoshone-Paiute Tribes filed claims seeking $3.4 and $3.5 million, respectively). The Government contended, however, that Congress had appropriated inadequate funds to enable the IHS to pay the Tribes’ contract support costs in full, while meeting all of the agency’s competing fiscal priorities.
Our conclusion in Cherokee Nation followed directly from well-established principles of Government contracting law. When a Government contractor is one of several persons to be paid out of a larger appropriation sufficient in itself to pay the contractor, it has long been the rule that the Government is responsible to the contractor for the full amount due under the contract, even if the agency exhausts the appropriation in service of other permissible ends. See Ferris v. United States, 27 Ct. Cl. 542, 546 (1892); Dougherty v. United States, 18 Ct. Cl. 496, 503 (1883); see also 2 GAO, Principles of Federal Appropriations Law, p. 6–17 (2d ed. 1992) (hereinafter GAO Redbook).
That is so “even if an agency’s total lump-sum appropriation is insufficient to pay all the contracts the agency has made.” Cherokee Nation, 543 U. S., at 637. In such cases, “[t]he United States are as much bound by their contracts as are individuals.” Lynch v. United States, 292 U. S. 571, 580 (1934)
(internal quotation marks omitted). Although the agency itself cannot disburse funds beyond those appropriated to it, the Government’s “valid obligations will remain enforceable in the courts.” GAO Redbook, p. 6–17.
The rule likewise furthers “the Government’s own long-run interest as a reliable contracting partner in the myriad workaday transaction of its agencies.” United States v. Winstar Corp., 518 U. S. 839, 883 (1996)
(plurality opinion). If the Government could be trusted to fulfill its promise to pay only when more pressing fiscal needs did not arise, would-be contractors would bargain warily—if at all—and only at a premium large enough to account for the risk of nonpayment. See, e.g., Logue, Tax Transitions, Opportunistic Retroactivity, and the Benefits of Government Precommitment, 94 Mich. L. Rev. 1129, 1146 (1996). In short, contracting would become more cumbersome and expensive for the Government, and willing partners more scarce.
That condition is satisfied here. In each FY between 1994 and 2001, Congress appropriated to the BIA a lump-sum from which “not to exceed” between $91 and $125 million was allocated for contract support costs, an amount that exceeded the sum due any tribal contractor. Within those constraints, the ability to direct those funds was “ ‘committed to agency discretion by law.’ ” Lincoln v. Vigil, 508 U. S. 182, 193 (1993)
(quoting 5 U. S. C. §701(a)(2)). Nothing, for instance, prevented the BIA from paying in full respondent Ramah Navajo Chapter’s contract support costs rather than other tribes’, whether based on its greater need or simply because it sought payment first.
See International Union, United Auto., Aerospace & Agricultural Implement Workers of Am. v. Donovan, 746 F. 2d 855, 861 (CADC 1984) (Scalia, J.) (“A lump-sum appropriation leaves it to the recipient agency (as a matter of law, at least) to distribute the funds among some or all of the permissible objects as it sees fit”). And if there was any doubt that that general rule applied here, ISDA’s statutory language itself makes clear that the BIA may allocate funds to one tribe at the expense of another. See §450j–1(b) (“[T]he 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 under this [Act]”). The upshot is that the funds appropriated by Congress were legally available to pay any individual tribal contractor in full. See 1 GAO Redbook, p. 4–6 (3d ed. 2004).
As in Cherokee Nation, we decline the Government’s invitation to ascribe “special, rather than ordinary” meaning to the fact that ISDA makes contracts “subject to the availability of appropriations.”
543 U. S., at 644. Under our previous interpretation of that language, that condition was satisfied here because Congress appropriated adequate funds to pay in full any individual contractor. It is important to afford that language a “uniform interpretation” in this and comparable statutes, “lest legal uncertainty undermine contractors’ confidence that they will be paid, and in turn increase the cost to the Government of purchasing goods and services.” Ibid. It would be particularly anomalous to read the statutory language differently here. Contracts made under ISDA specify that “ ‘[e]ach provision of the [ISDA] and each provision of this Contract shall be liberally construed for the benefit of the Contractor. . . .’ ” §450l(c), (model agreement §1(a)(2)). The Government, in effect, must demonstrate that its reading is clearly required by the statutory language. Accordingly, the Government cannot back out of its contractual promise to pay each Tribe’s full contract support costs.
The Government primarily seeks to distinguish this case from Cherokee Nation and Ferris on the ground that Congress here appropriated “not to exceed” a given amount for contract support costs, thereby imposing an express cap on the total funds available. See Brief for Petitioners 26, 49. The Government argues, on this basis, that Ferris and Cherokee Nation involved “contracts made against the backdrop of unrestricted, lump-sum appropriations,” while this case does not. See Brief for Petitioners 49, 26.
That premise, however, is inaccurate. In Ferris, Congress appropriated “[f]or improving Delaware River below Bridesburg, Pennsylvania, forty-five thousand dollars.” 20Stat.
364. As explained in the Government’s own appropriations law handbook, the “not to exceed” language at issue in this case has an identical meaning to the quoted language in Ferris. See GAO Redbook, p. 6–5 (“Words like ‘not to exceed’ are not the only way to establish a maximum limitation. If the appropriation includes a specific amount for a particular object (such as ‘For Cuban cigars, $100’), then the appropriation is a maximum which may not be exceeded”). The appropriation in Cherokee Nation took a similar form. See, e.g., 108Stat.
2527–2528 (“For expenses necessary to carry out . . . ISDA [and certain other enumerated Acts], $1,713,052,000”). There is no basis, therefore, for distinguishing the class of appropriation in those cases from this one. In each case, the agency remained free to allocate funds among multiple contractors, so long as the contracts served the purpose Congress identified.
The dissent attempts to distinguish this case from Cherokee Nation and Ferris on different grounds, relying on §450j–1(b)’s proviso that “the Secretary is not required to reduce funding for programs, projects, or activities serving a tribe to make funds available to another tribe.” In the dissent’s view, that clause establishes that each dollar allocated by the Secretary reduces the amount of appropriations legally available to pay other contractors. In effect, the dissent understands §450j–1(b) to make the legal availability of appropriations turn on the Secretary’s expenditures rather than the sum allocated by Congress.
That interpretation, which is inconsistent with ordinary principles of Government contracting law, is improbable. We have explained that Congress ordinarily controls the availability of appropriations; the agency controls whether to make funds from that appropriation available to pay a contractor. See Cherokee Nation, 543 U. S., at 642–643. The agency’s allocation choices do not affect the Government’s liability in the event of an underpayment. See id., at 641 (when an “ ‘unrestricted appropriation is sufficient to fund the contract, the contractor is entitled to payment even if the agency has allocated the funds to another purpose’ ”).
In Cherokee Nation, we found those ordinary principles generally applicable to ISDA. See id., at 637–646. We also found no evidence that Congress intended that “the tribe should bear the risk that a total lump-sum appropriation (though sufficient to cover its own contracts) will not prove sufficient to pay all similar contracts.” Id., at 638 (citing Brief for Federal Parties 23–25). The dissent’s reading, by contrast, would impose precisely that regime. See post, at 4–5.
The better reading of §450j–1(b) accords with ordinary Government contracting principles. As we explained, supra, at 9, the clause underscores the Secretary’s discretion to allocate funds among tribes, but does not alter the Government’s legal obligation when the agency fails to pay. That reading gives full effect to the clause’s text, which addresses the “amount of funds provided,” and specifies that the Secretary is not required to reduce funding for one tribe to make “funds available” to another. 450j–1(b). Indeed, even the Government acknowledges the clause governs the Secretary’s discretion to distribute funds. See Brief for Petitioners 52 (pursuant to §450j–1(b), the Secretary was not obligated to pay tribes’ “contract support costs on a first-come, first-served basis, but had the authority to distribute the available money among all tribal contractors in an equitable fashion”).
At minimum, the fact that we, the court below, the Government, and the Tribes do not share the dissent’s reading of §450j–1(b) is strong evidence that its interpretation is not, as it claims, “unambiguous[ly]” correct. Post, at 7 (opinion of Roberts, C. J.). Because ISDA is construed in favor of tribes, that conclusion is fatal to the dissent.
The remaining counterarguments are unpersuasive. First, the Government suggests that today’s holding could cause the Secretary to violate the Anti-Deficiency Act, which prevents federal officers from “mak[ing] or authoriz[ing] an expenditure or obligation exceeding an amount available in an appropriation.” 31 U. S. C. §1341(a)(1)(A). But a predecessor version of that Act was in place when Ferris and Dougherty were decided, see GAO Redbook, pp. 6–9 to 6–10, and the Government did not prevail there. As Dougherty explained, the Anti-Deficiency Act’s requirements “apply to the official, but they do not affect the rights in this court of the citizen honestly contracting with the Government.” 18 Ct. Cl., at 503; see also Ferris, 27 Ct. Cl., at 546 (“An appropriation per se merely imposes limitations upon the Government’s own agents; . . . but its insufficiency does not pay the Government’s debts, nor cancel its obligations”).
Second, the Government argues that Congress could not have intended for respondents to recover from the Judgment Fund, 31 U. S. C. §1304, because that would allow the Tribes to circumvent Congress’ intent to cap total expenditures for contract support costs.
That contention is puzzling. Congress expressly provided in ISDA that tribal contractors were entitled to sue for “money damages” under the Contract Disputes Act upon the Government’s failure to pay, 25 U. S. C. §§450m–1(a), (d), and judgments against the Government under that Act are payable from the Judgment Fund, 41 U. S. C. §7108(a).
Indeed, we cited the Contract Disputes Act, Judgment Fund, and Anti-Deficiency Act in Cherokee Nation, explaining that if the Government commits its appropriations in a manner that leaves contractual obligations unfulfilled, “the contractor [is] free to pursue appropriate legal remedies arising because the Government broke its contractual promise.” 543 U. S., at 642.
Third, the Government invokes cases in which courts have rejected contractors’ attempts to recover for amounts beyond the maximum appropriated by Congress for a particular purpose. See, e.g., Sutton v. United States, 256 U. S. 575 (1921)
. In Sutton, for instance, Congress made a specific line-item appropriation of $23,000 for the completion of a particular project. Id., at 577. We held that the sole contractor engaged to complete that project could not recover more than that amount for his work.
The Ferris and Sutton lines of cases are distinguishable, however. GAO Redbook, p. 6–18. “[I]t is settled that contractors paid from a general appropriation are not barred from recovering for breach of contract even though the appropriation is exhausted,” but that “under a specific line-item appropriation, the answer is different.” Ibid.
The different results “follo[w] logically from the old maxim that ignorance of the law is no excuse.” Ibid. “If Congress appropriates a specific dollar amount for a particular contract, that amount is specified in the appropriation act and the contractor is deemed to know it.” Ibid. This case is far different. Hundreds of tribes entered into thousands of independent contracts, each for amounts well within the lump sum appropriated by Congress to pay contract support costs. Here, where each Tribe’s “contract is but one activity under a larger appropriation, it is not reasonable to expect [each] contractor to know how much of that appropriation remain[ed] available for it at any given time.” Ibid.; see also Ferris, 27 Ct. Cl., at 546.
Congress is not short of options. For instance, it could reduce the Government’s financial obligation by amending ISDA to remove the statutory mandate compelling the BIA to enter into self-determination contracts, or by giving the BIA flexibility to pay less than the full amount of contract support costs. It could also pass a moratorium on the formation of new self-determination contracts, as it has done before. See §328, 112Stat.
2681–291 to 292. Or Congress could elect to make line-item appropriations, allocating funds to cover tribes’ contract support costs on a contractor-by-contractor basis. On the other hand, Congress could appropriate sufficient funds to the BIA to meet the tribes’ total contract support cost needs. Indeed, there is some evidence that Congress may do just that. See H. R. Rep. No. 112–151, p. 42 (2011) (“The Committee believes that the Bureau should pay all contract support costs for which it has contractually agreed and directs the Bureau to include the full cost of the contract support obligations in its fiscal year 2013 budget submission”).
The desirability of these options is not for us to say. We make clear only that Congress has ample means at hand to resolve the situation underlying the Tribes’ suit. Any one of the options above could also promote transparency about the Government’s fiscal obligations with respect to ISDA’s directive that contract support costs be paid in full. For the period in question, however, it is the Government—not the Tribes—that must bear the consequences of Congress’ decision to mandate that the Government enter into binding contracts for which its appropriation was sufficient to pay any individual tribal contractor, but “insufficient to pay all the contracts the agency has made.” Cherokee Nation, 543 U. S., at 637.
As defined by ISDA, contract support costs “shall consist of an amount for the reasonable costs for activities which must be carried on by a tribal organization as a contractor to ensure compliance with the terms of the contract and prudent management, but which . . . (A) normally are not carried on by the respective Secretary in his direct operation of the program; or (B) are provided by the Secretary in support of the contracted program from resources other than those under contract.” §450j–1(a)(2). Such costs include overhead administrative costs, as well as expenses such as federally mandated audits and liability insurance. See Cherokee Nation of Okla., 543 U. S., at 635.
Compare 644 F. 3d 1054 (case below), with Arctic Slope Native Assn., Ltd. v. Sebelius, 629 F. 3d 1296 (CA Fed. 2010) (no liability to pay total contract support costs beyond cap in appropriations Act).
In Ferris, for instance, Congress appropriated $45,000 for the improvement of the Delaware River below Bridesburg, Pennsylvania. Act of Mar. 3, 1879, ch. 181, 20Stat.
364. The Government contracted with Ferris for $37,000 to dredge the river. Halfway through Ferris’ performance of his contract, the United States Army Corps of Engineers ran out of money to pay Ferris, having used $17,000 of the appropriation to pay for other improvements. Nonetheless, the Court of Claims found that Ferris could recover for the balance of his contract. As the court explained, the appropriation “merely impose[d] limitations upon the Government’s own agents; . . . its insufficiency [did] not pay the Government’s debts, nor cancel its obligations, nor defeat the rights of other parties.” 27 Ct. Cl., at 546; see also Dougherty, 18 Ct. Cl., at 503 (rejecting Government’s argument that a contractor could not recover upon similar facts because the “appropriation had, at the time of the purchase, been covered by other contracts”).
Indeed, the Indian Health Service once allocated its appropriations for new ISDA contracts on a first-come, first-serve basis. See Dept. of Health and Human Services, Indian Self-Determination Memorandum No. 92–2, p. 4 (Feb. 27, 1992).
The Government’s reliance on this statutory language is particularly curious because it suggests it is superfluous. See Brief for Petitioners 30–31 (it is “unnecessary” to specify that contracts are “subject to the availability of appropriations” (internal quotation marks omitted));see also Reply Brief for Petitioners 7 (“[A]ll government contracts are contingent upon the appropriations provided by Congress”).
The dissent’s view notwithstanding, it is beyond question that Congress appropriated sufficient unrestricted funds to pay any contractor in full. The dissent’s real argument is that §450j–1(b) reverses the applicability of the Ferris rule to ISDA, so that the Secretary’s allocation of funds to one contractor reduces the legal availability of funds to others. See post, at 4 (opinion of Roberts, C. J.) (“that the Secretary could have allocated the funds to [a] tribe is irrelevant. What matters is what the Secretary does, and once he allocates the funds to one tribe, they are not available to another”). We are not persuaded that §450j–1(b) was intended to enact that radical departure from ordinary Government contracting principles. Indeed, Congress has spoken clearly and directly when limiting the Government’s total contractual liability to an amount appropriated in similar schemes; that it did not do so here further counsels against the dissent’s reading. See, e.g., 25 U. S. C. §2008(j)(2) (“[i]f the total amount of funds necessary to provide grants to tribes . . . for a fiscal year exceeds the amount of funds appropriated . . . , the Secretary shall reduce the amount of each grant [pro rata]”).
We have some doubt whether a Government employee would violate the Anti-Deficiency Act by obeying an express statutory command to enter a contract, as was the case here. But we need not decide the question, for this case concerns only the contractual rights of tribal contractors, not the consequences of entering into such contracts for agency employees.
The Judgment Fund is a “permanent, indefinite appropriation” enacted by Congress to pay final judgments against the United States when, inter alia, “[p]ayment may not legally be made from any other source of funds.” 31 CFR §256.1 (2011).
For that reason, the Government’s reliance on Office of Personnel Management v. Richmond, 496 U. S. 414 (1990)
, is misplaced. In Richmond, we held that the Appropriations Clause does not permit plaintiffs to recover money for Government-caused injuries for which Congress “appropriated no money.” Id., at 424. Richmond, however, indicated that the Appropriations Clause is no bar to recovery in a case like this one, in which “the express terms of a specific statute” establish “a substantive right to compensation” from the Judgment Fund. Id.,at 432.
Of course, “[t]he terms ‘lump-sum’ and ‘line-item’ are relative concepts.” GAO Redbook, p. 6–165. For example, an appropriation for building two ships “could be viewed as a line-item appropriation in relation to the broader ‘Shipbuilding and Conversion’ category, but it was also a lump-sum appropriation in relation to the two specific vessels included.” Ibid. So long as a contractor does not seek payment beyond the amount Congress made legally available for a given purpose, “[t]his factual distinction does not affect the legal principle.” Ibid. See also In re Newport News Shipbuilding & Dry Dock Co., 55 Comp. Gen. 812 (1976).
Today the Court concludes that the Federal Government must pay the full amount of contract support costs incurred by the respondent Tribes, regardless of whether there are any appropriated funds left for that purpose. This despite the facts that payment of such costs is “subject to the availability of appropriations,” a condition expressly set forth in both the statute and the contracts providing for such payment, 25 U. S. C. §§450j–1(b), 450l(c) (Model Agreement §1(b)(4)); that payment of the costs for all tribes is “not to exceed” a set amount, e.g., 108Stat.
2511, an amount that would be exceeded here; and that the Secretary “is not required to reduce funding for programs, projects, or activities serving a tribe to make funds available to another tribe,” §450j–1(b). Because the Court’s conclusion cannot be squared with these unambiguous restrictions on the payment of contract support costs, I respectfully dissent.
Congress restricted the amount of funds “available” to pay the Tribes’ contract support costs in two ways. First, in each annual appropriations statute for the Department of the Interior from fiscal year 1994 to 2001, Congress provided that spending on contract support costs for all tribes was “not to exceed” a certain amount. The fiscal year 1995 appropriations statute is representative. It provided: “For operation of Indian programs . . . , $1,526,778,000, . . . of which not to exceed $95,823,000 shall be for payments to tribes and tribal organizations for contract support costs . . . .” 108Stat.
2510–2511. As the Court acknowledges, ante, at 11–12, the phrase “not to exceed” has a settled meaning in federal appropriations law. By use of the phrase, Congress imposed a cap on the total funds available for contract support costs in each fiscal year. See 2 General Accounting Office, Principles of Federal Appropriations Law, p. 6–8 (2d ed. 1992) (hereinafter GAO Redbook) (“[T]he most effective way to establish a maximum . . . earmark is by the words ‘not to exceed’ or ‘not more than’ ”).
Second, in §450j–1(b) itself—in the very same sentence that conditions funding on the “availability of appropriations”—Congress provided that “the Secretary [of the Interior] is not required to reduce funding for programs, projects, or activities serving a tribe to make funds available to another tribe or tribal organization under [the Act].” An agency may be required to shift funds from one object to another, within statutory limits, when doing so is necessary to meet a contractual obligation. See 1 GAO Redbook, p. 2–26 (2d ed. 1991). But the “reduction” clause in §450j–1(b) expressly provides that the Secretary is “not required” to engage in such reprogramming to make one tribe’s funds “available to another tribe.” It follows that appropriations allocated for “programs, projects, or activities serving a tribe” are not “available” to another tribe, unless the Secretary reallocates them. Contrary to the Court’s suggestion, ante, at 13–14, the Government shares this view that the “reduction” clause “specifically relieves the Secretary of any obligation to make funds available to one contractor by reducing payments to others.” Brief for Petitioners 51 (citing Arctic Slope Native Assn., Ltd. v. Sebelius, 629 F. 3d 1296, 1304 (CA Fed. 2010), cert. pending, No. 11–83 (filed July 18, 2011)).
Given these express restrictions established by Congress—which no one doubts are valid—I cannot agree with the Court’s conclusion that appropriations were “available” to pay the Tribes’ contract support costs in full. Once the Secretary had allocated all the funds appropriated for contract support costs, no other funds could be used for that purpose without violating the “not to exceed” restrictions in the relevant appropriations statutes. The Court agrees. Ante, at 11–12. That leaves only one other possible source of funds to pay the disputed costs in this case: funds appropriated for contract support costs, but allocated to pay such costs incurred by other tribes. Those funds were not “available” either, however, because they were “funding for programs, projects, or activities serving a tribe,” and the Secretary was not required to reduce such funding “to make funds available to another tribe.” §450j–1(b).
The Court rejects this reading of the “reduction” clause, on the ground that it would constitute a “radical departure from ordinary Government contracting principles.” Ante, at 13, n. 6. But the fact that the clause operates as a constraint on the “availability of appropriations” is evident not only from its text, which speaks in terms of “funds available,” but also from its placement in the statute, immediately following the “subject to the availability” clause. Under the Court’s view, by contrast, the “reduction” clause merely “underscores the Secretary’s discretion to allocate funds among tribes.” Ante, at 13. There is, however, no reason to suppose that Congress enacted the provision simply to confirm this “ordinary” rule. Ibid. We generally try to avoid reading statutes to be so “insignificant.” TRW Inc. v. Andrews, 534 U. S. 19, 31 (2001)
The Court maintains that its holding is compelled by our decision in Cherokee Nation of Okla. v. Leavitt, 543 U. S. 631 (2005)
. Ante, at 8. Like respondents here, the tribes in Cherokee Nation sued the Government for unpaid contract support costs under the Act. Congress had appropriated certain sums to the Indian Health Service “[f]or expenses necessary to carry out” the Act, e.g., 108Stat.
2527–2528, but—unlike in this case—those appropriations “contained no relevant statutory restriction,” 543 U. S., at 637. The Government in Cherokee Nation contended that it was not obligated to pay the contract support costs as promised, in light of the “reduction” clause in §450j–1(b). The Government argued that the clause “makes nonbinding a promise to pay one tribe’s costs where doing so would require funds that the Government would otherwise devote to ‘programs, projects, or activities serving . . . another tribe.’ ” Id., at 641 (quoting §450j–1(b)).
The Court also relies on Ferris v. United States, 27 Ct. Cl. 542 (1892). That case involved a government contract to dredge the Delaware River. When work under the contract stopped because funds from the relevant appropriation had been exhausted, a contractor sued the Government for breach of contract, and the Court of Claims held that he was entitled to recover lost profits. As the court explained, “[a] contractor who is one of several persons to be paid out of an appropriation is not chargeable with knowledge of its administration, nor can his legal rights be affected or impaired by its maladministration or by its diversion, whether legal or illegal, to other objects.” Id., at 546. That principle, however, cannot “dictate the result in this case.” Ante, at 8. The statute in Ferris appropriated an amount “[f]or improving [the] Delaware River,” which prevented spending for that purpose beyond the specified amount. 20Stat.
364. But in that case, all funds appropriated for that purpose were equally available to all contractors. Here that is not true; §450j–1(b) makes clear that funds allocated to one contractor are not available to another. Thus, the principle in Ferris does not apply.
Transcript: ORAL ARGUMENT OF MARK R. FREEMAN ON BEHALF OF THE PETITIONERS
Chief Justice John G. Roberts: We'll hear argument this morning in Case 11-551, Salazar, Secretary of the Interior v. Ramah Navajo Chapter.
Justice Sonia Sotomayor: Excuse me, but could the Secretary have done anything else?
Mr. Freeman: I'm sorry.
Justice Sonia Sotomayor: Could the Secretary have done anything else?
Mr. Freeman: Right.
Justice Sonia Sotomayor: --so that it's in effect acting -- I don't want to use the word "arbitrarily" -- but acting in whatever its best interest is.
Mr. Freeman: Yes, Your Honor.
Justice Sonia Sotomayor: Says it has a policy.
Mr. Freeman: Yes, and--
Justice Sonia Sotomayor: The allegation is, is that it's not following it, that it's choosing to pay people some more than others.
Mr. Freeman: --Right.
Justice Ruth Bader Ginsburg: Before you do that--
Mr. Freeman: --Yes.
Justice Ruth Bader Ginsburg: --It was my understanding that that system, that has been described as arbitrary, was not the one that was applicable to the years in question.
At -- at the time of the district court's ruling in this case, from 1994 to about 2006, the Secretary followed a uniform pro rata distribution methodology according to the needs of each of the individual tribes.
Now, that's what we thought the tribes wanted.
We thought that was the fairest way to do it.
Justice Anthony Kennedy: And all within the -- all within the dollar amount that was specified by the Congress in the "not to exceed" language.
Mr. Freeman: That's exactly right, Your Honor.
So each tribe has an amount of need.
This is the amount that is estimated.
It's a negotiated figure between the Secretary and each tribe.
And it is undisputed that the amounts that Congress has been -- has appropriated have never been enough to pay 100 percent of each of those figures for each member of the Respondent class.
Justice Antonin Scalia: Didn't we have similar language in Cherokee Nation?
Didn't we say that that language in Cherokee Nation, which was in the general appropriations statute although not on each contract, didn't mean the Secretary could refuse to pay?
Mr. Freeman: No, Your Honor.
We did not have similar language in Cherokee, if you mean the Appropriations Act.
It was under the same--
Justice Antonin Scalia: No, I don't mean the Appropriations Act.
I mean -- I mean the general statute that governed this program.
And maybe it would be helpful if I could--
Justice Antonin Scalia: So why does it mean one thing there and mean something else when -- in the Appropriations Act?
Mr. Freeman: --Well -- I may not be understanding Your Honor's question, but I -- I think it might be helpful if I explain what was at issue in Cherokee.
In Cherokee, the government was not in this Court making Appropriations Clause arguments.
We were here making a very different argument.
It was undisputed in Cherokee that Congress had appropriated enough money for the unobligated available funds, lawfully available funds, for the Secretary to pay all of the contracts that were at issue.
Our argument -- and to be sure, we thought we were right -- our argument was that Congress had in other provisions of the Act allowed us to set aside a certain amount of money that, albeit lawfully available to pay the contracts, we thought we could use to fund the agency's inherent Federal operations.
And the Court said: No, no, no.
These are contracts.
The money was lawfully available for you to pay, and there was no statutory restriction against you paying it, so you had to pay it.
And this case involves the circumstance that--
Justice Sonia Sotomayor: Well, how -- what was our reference and acceptance of the Ferris doctrine?
And the Ferris doctrine was almost identical to this situation, where Congress allotted a certain amount to the building of a particular dam, and the same -- we applied the Ferris principle and said even though they gave it to one type of contract, the dam, they were paying 1 percent less than others.
Mr. Freeman: --No -- no, Your Honor.
Justice Sonia Sotomayor: Where they had an allotment adequate enough to cover that individual.
I think that's not quite an accurate characterization of Ferris.
And it's important to understand what Ferris--
Justice Sonia Sotomayor: I know what the Federal Circuit said.
I don't think the Federal Circuit's right.
If you read Ferris, there was an appropriation for the dam.
Mr. Freeman: --Ferris was an appropriation for -- I think it was 40-some thousand dollars for improvements to the Delaware River.
And the government, the Army Corps of Engineers, let out a contract for $37,000 to dredge the river.
Then after the contract had been let out -- and this is critical.
If you stop the movie at the time the contract was issued, there was sufficient funds to pay that contract.
They were lawfully available.
We obligated them to the -- to the contractor.
And then what happened in Ferris was, after that lawful binding agreement was entered, agency officials decided in their discretion that they'd prefer not to spend the money on that, and they instead built a wharf or something.
And what the Court said in Ferris -- and this is -- we're not -- we have no quarrel with this principle -- is that when the funds are lawfully available and you obligate them to a contractor without some contingency, then you can't just decide to spend it on something else.
And it's not a defense to the breach that at the end of the -- that at the end, once you've breached the contract, there isn't enough money left in the appropriation to go back and pay them what you should have.
That's different from this case, that there is not enough lawfully available money to pay every--
Justice Antonin Scalia: No, but -- but there wasn't in Ferris either.
I mean, that was the problem.
If the appropriations had been enough to cover that plus the later expenditures, there would have been no problem.
Mr. Freeman: --Your Honor, I think Ferris is correctly understood -- particularly given this Court's subsequent decisions in Sutton, in Bradley, Leiter, and other cases, Ferris is correctly understood as saying -- and this is the proposition, incidentally, for which the Court's cited Ferris in Cherokee.
Ferris is understood as saying if you've got a binding obligation in which you promised to pay money that is lawfully available, Congress gave it to you, then if you, agency officials, do something in your executive discretion--
Justice Antonin Scalia: Available subject to appropriations.
I mean, it was subject to appropriations.
Mr. Freeman: --Well, in Ferris, there were -- in fact, the contract was not made subject to appropriations.
And one of the things the Federal Circuit pointed out was that the
"subject to the availability of appropriations. "
language that is now ubiquitous in government contracts was developed in part to make sure that the Ferris situation didn't later arise.
But I want to underscore, if we know one thing in this case, we know that Congress intended for the Secretary not to pay any more than the amounts in the statutory caps.
Justice Elena Kagan: Mr. Freeman, could I try a hypothetical on you?
And it's -- it really is going to this question of what Ferris means.
So suppose that there's a government program, and it's to purchase airplanes.
And it's -- the authorization language says this is subject to appropriations, in the same way that this language does.
And the government, under this program, enters into 10 contracts of a million dollars each to buy 10 airplanes.
But then it turns out that Congress appropriates only $9 million, not $10 million.
So my question is: Now there are 10 contractors and -- but there's a shortfall of a million dollars--
Justice Elena Kagan: --do those contractors have contractual rights under Ferris?
Mr. Freeman: I -- Your Honor, it's going to depend on a couple of things.
And let me -- let me explain.
I think, because by hypothesis in your hypothetical we're entering into the contracts in advance of appropriations, there is no right to be paid until the appropriations are made.
So the appropriation has been made.
It's a $9 million appropriation.
And in that circumstance, the agency cannot pay more than $9 million, and there is no binding obligation, contractual obligation, on the government to pay more.
Let me add something, though, in response--
Justice Elena Kagan: So -- so either one of these airplane manufacturers is going to not have what he contracted for, or all of them are not going to have what they contracted for, because everybody is going to -- their contract is going to be sliced.
Mr. Freeman: --And, Your Honor, the reason why this is not a problem in real life is that there are other provisions in your ordinary procurement contracts, under the ordinary kind of contracts that this case is not, that take care of that.
And the principal one is--
Justice Elena Kagan: My understanding, Mr. Freeman, is that that is what Ferris said, was that Ferris said in that situation where it turns out that there's a shortfall but where there are contractual commitments, that -- that the government is bound to live up to those contractual commitments.
And if there's a shortfall, then it comes out of the Judgment Fund.
Your Honor, it -- there are a couple of things there.
But let me first explain why as a practical matter that doesn't happen in circumstances that are -- are not like this scheme where we're required to enter into every contract.
In your ordinary government procurement scheme, there are termination for convenience provisions.
And, in fact, what happens in the circumstances in which Your Honor posits is the government terminates for convenience enough of the contracts to make sure that we have the money to pay.
And if we didn't do that, it would be a violation of the Anti-Deficiency Act.
And this Court has said many times--
Justice Sonia Sotomayor: So do the tribes have the right to stop providing the services--
Justice Sonia Sotomayor: --that they've contracted to?
Justice Sonia Sotomayor: How do they know that until they know what they're getting?
Mr. Freeman: Well--
Justice Sonia Sotomayor: Meaning they don't know what they're getting.
Mr. Freeman: --Well, they do know.
Justice Sonia Sotomayor: They signed a contract that says you're going to pay them for their services to their members and for their administrative costs.
They incur that cost, and then at the end of the year, the government now says to them you've honored your part, but we're not going to honor ours.
Mr. Freeman: No -- no, Your Honor.
That's -- that's not correct, and let me explain why.
First, every contract that the -- every member of the Respondent class signed in this case says that the contractor's obligation to perform the services that are at issue is subject to the availability of appropriated funds.
That's Section (1)(c)(iii) of the model agreement that is read into every ISDA contract.
They further have the availability under Section (1)(b)(v) of that model agreement to stop at any point if they are worried that there's not going to be enough money and seek assurances from the Secretary that there will be.
Now, as to whether they know and when they know how much money they are going to get, that was the point of the 2006 distribution policy that the Secretary adopted.
Under the pro-rata system that we used for the first many years, the tribes said, look, we don't know how pro-rata is going to work out.
So, in consultation with the tribes, and, indeed, with the aid of several of the counsel for the Respondent class, we drafted a policy that--
Justice Sonia Sotomayor: What does the system do to the 50-odd contracts that Arctic Slope, in its amici brief, points to that are similar to these?
Does this now mean that moving forward, that every government contractor who has a "subject to appropriations" language takes the risk that at some point in the middle of the contract, the government is going to dishonor its obligation and pay it less than it said it would?
And this is my--
Justice Sonia Sotomayor: So how do -- how do we differentiate those 50 other contracts?
Mr. Freeman: --Well, I think they were citing a number of different statutes in which the statutes provide that funding is subject to the availability of appropriations.
Now, it's important to underscore, that's why I started with this point, I don't believe in any of those statutory schemes is the government obligated to enter into every contract that comes in the door.
Justice Elena Kagan: Well, but that's partly why I asked you my hypothetical, Mr. Freeman, because I sort of wanted to see whether you would distinguish the hypothetical on that basis--
Justice Elena Kagan: --but you didn't.
You said no, it doesn't really matter.
Even if the government is not obligated to enter into contracts, if the government has entered into too many, too bad; we can't make those additional appropriations.
Mr. Freeman: And, Your Honor, it is -- the unique features of this statutory scheme are absolutely important, but I want to -- I took Your Honor's question to be under the general appropriations principles that we are describing, what would the result be?
And I think I'm right, but I should also add, as I said before, there are very strict fiscal controls in 31 U.S.C. 1501, et sequitur, that make clear and prevent the circumstance that Your Honor describes.
Justice Stephen G. Breyer: I'm sorry, I'm not clear on what the hypothetical is.
I thought her hypothetical -- Justice Kagan's -- was a situation where the statute says, Mr. Secretary, you can spend no money beyond what is appropriated.
Justice Stephen G. Breyer: But the contract doesn't mention it.
That's Ferris.
I thought that the -- the real world is, in contracting, you typically have both a statute that says don't pay more than is appropriated--
Justice Stephen G. Breyer: --and in the contract it says, subject to appropriation, putting the contracting party on notice.
Justice Stephen G. Breyer: So which were you answering?
Mr. Freeman: --I -- with respect to Justice Kagan, I believe we had a colloquy in which I said that because in her hypothetical we were entering into the contract in advance of appropriations, they would have to be made express -- the contracts themselves would have to be subject to the availability of appropriations in the contracts.
Justice Stephen G. Breyer: The words in the contract are "subject to appropriations".
And without that, it would be a violation of the Antideficiency Act--
So in that world -- now we get to the question -- in that world, what happens when 15 people each enter into such a contract for $100,000 each, and the appropriation turns out to be too small to pay all of them, but big enough to pay some?
Mr. Freeman: And, Your Honor, what I was trying to answer is that, in your ordinary contractual scheme, the government solves that problem in a very straightforward way.
We terminate for convenience the contracts -- enough of those contracts to ensure that we have no obligations beyond the available appropriations.
Now, we can't do that here, which is why this is ultimately a question of congressional intent.
Justice Sonia Sotomayor: So why don't we let Congress fix it?
Because there are so many ways that Congress could fix this problem directly.
By doing a line item allocation, it could take away the obligation to enter into these contracts and fully fund.
It could be much more direct--
Mr. Freeman: Your--
Justice Sonia Sotomayor: --than it's being, given the interpretation that you're advancing.
Mr. Freeman: --Your Honor, I think it's important to understand what -- and maybe it would help if I took a minute to explain this -- what Congress was trying to do in this statutory scheme.
Justice Sonia Sotomayor: It was trying -- it was trying to tell the tribes, we are honoring our obligation by paying you the costs, but we are really not going to do it because we are going to let the government give you less?
Look, Congress could--
Justice Sonia Sotomayor: I have to assume Congress intends what it says.
It intends to obligate you to enter into contracts that -- that give -- make you commit to paying their costs, correct?
Mr. Freeman: --Not with -- yes.
But 450j-1(b) says, notwithstanding any provision of this Act, all funding under this Act is subject to the availability of appropriations.
And let me explain why Congress would have wanted to enact this statute that has some unusual features.
Congress, of course, could have said, we want to give every tribe the opportunity to enter -- to provide services in its own name to its own people, but we are going to do this on a regular contract basis, meaning we'll just give us -- some to the Secretary.
The Secretary signs contracts as they come in until he doesn't have any money left.
And then any tribe after that who asks for a -- for a contract, the Secretary says no, we don't have the money to do it.
But Congress chose a -- a different approach.
Congress wanted, as a matter of self-determination, to require the Secretary to give every tribe who wants the ability to do this the opportunity to do it.
But, if it didn't then say, all funding is subject to the availability of appropriations, the result would be that the government would be exposed to a liability that Congress could not estimate, because the ability of these tribes to pay for overhead costs and whatever varies tremendously from tribe--
Justice Ruth Bader Ginsburg: To what extent do you rely on -- you haven't mentioned it up till now, but Congress, in these appropriations, said "not in excess of".
Justice Ruth Bader Ginsburg: It wasn't just a general "subject to appropriations".
It was a specific amount, the Secretary shall not pay in excess of a certain dollar amount for these costs.
Justice Anthony Kennedy: I had exactly the same question.
The "not to exceed" language, which I think is the word, not to exceed, hasn't been mentioned by you yet because -- maybe you haven't had time.
Justice Anthony Kennedy: But -- but I thought that was what Judge Dyk said--
Justice Anthony Kennedy: --was the critical -- the difference between this and even the Cherokee case.
Justice Anthony Kennedy: And so my question is -- is the same as Justice Ginsburg's.
Isn't a principal part of your argument that this contract said not to exceed, and then the sums differ from year to year, but let's say $95 million?
I mean -- and what I -- what I tried to answer to a question earlier, it is absolutely clear what Congress was trying to do here.
Congress said not to exceed a specific sum from year to year--
Justice Anthony Kennedy: When the Congressional Budget Office, or whatever agency it is that figures out whether there is a deficit and, if so, of how much, do they look at "not to exceed", and do they take that amount seriously?
Mr. Freeman: --Oh, oh, absolutely, Your Honor.
Justice Anthony Kennedy: --But the -- but the position of the Respondents is that it makes no difference.
Mr. Freeman: --No difference at all.
Justice Anthony Kennedy: Congress is saying nothing at all.
Mr. Freeman: Yes, yes.
Justice Ruth Bader Ginsburg: It really--
Chief Justice John G. Roberts: So the consequence on the ground is that, if I'm a tribe and I want this money, and I figure out that this is going to cost me $80,000--
Chief Justice John G. Roberts: --I sign a contract and say, this is going to cost me $100,000, because I know there isn't going to be $100,000; there is only going to be $80,000, and that's what I need, right?
Mr. Freeman: Well, in fact, it can't work that way, Your Honor, because the amounts are limited by statute to the reasonable and allowable costs that are not duplicative of the principal program funds, the funds to run the program--
Chief Justice John G. Roberts: Well, but it's -- well, if 80,000 is reasonable, the only way to get that is to ask for 100?
And if a tribe thinks that we haven't put in to the -- we haven't offered them enough money for their contract support costs, they are allowed to decline the offer that we make.
And they can -- unusually, for government contractors, they can file a separate lawsuit before entering into the contract to litigate whether the terms are sufficient.
Justice Ruth Bader Ginsburg: --Mr. Freeman, where did these caps come from?
Did the agency initiate them?
Or, there is a chart -- perhaps I don't understand it correctly.
It's on page 210 of the joint appendix.
It does -- it does seem to indicate that it was the BIA that proposed the cutbacks.
Mr. Freeman: The caps come from Congress, Your Honor.
Respondents have make -- have made an argument at the end of their brief that the government should be liable here notwithstanding the caps because the BIA hasn't requested sufficient funding from Congress -- or, rather, the President hasn't requested sufficient funding from Congress.
That argument, we think, is baseless for a number of reasons.
And just as a factual matter, the GAO has done some studies of this.
There are reports in the joint appendix explaining why BIA has not in every year asked for what turned out to be enough money.
And that's because these -- this funding is done on a prospective estimated basis.
And because we are required to take into -- we are required to accept every contract that comes in the door, BIA may estimate and make its best available estimate, and OMB and the President may accept that if he chooses, but it still turn may turn out not to be enough.
Justice Antonin Scalia: That's not really relevant here anyway, is it?
Mr. Freeman: No, it is not.
Justice Antonin Scalia: What I don't understand is why the language $900,000.
You mean the world changes if -- if Congress, instead of just appropriating $900,000, authorizes the Secretary to expend not to exceed $900,000?
Mr. Freeman: I don't think in that circumstance there would be any difference.
Here, the reason why it's different is that this is ultimately a question of what Congress was trying to do.
There is no constitutional argument that Congress can't enact these kind of caps, and we know from the "not to exceed" language that Congress was being as emphatic as it could.
Justice Antonin Scalia: --Well, I -- I think $900,000 is pretty emphatic, if that's all you appropriate.
And just -- it's just this is the way, as an ordinary matter, that in appropriations Congress expresses an internal cap.
Justice Elena Kagan: But that runs you right into Ferris.
Then you're saying that there's no difference between the standard Ferris-type appropriation, which is just an amount of money, and this kind of appropriation, which is up to or not to exceed that amount of money.
Mr. Freeman: --Your Honor, Ferris we think is inapplicable just to this type of statutory scheme where we're required to enter into the contracts, and there's a limited sum available.
That's Judge Dyk's reasoning in the Federal Circuit, but let me put that aside for the moment and address Ferris directly.
As I said before, Ferris is about the circumstance in which there are enough available funds in the first instance to pay the contractual obligations.
Now, Ferris does not and cannot stand for the proposition that an executive officer looking at the amount Congress made available in the first instance can bind the Treasury to pay more than Congress has expressly stated he may bind it to.
This Court has said many, many times--
Justice Anthony Kennedy: I take it the Respondents' position is that the contracting officer says, now, this is going to go over the not-to-exceed amount, but not to worry, just sue us under the judgment -- just sue us under the Judgment Act.
And there is no reason to think that Congress contemplated such a scheme, which would amount to essentially giving full contract support cost funding, but only for the tribes who have the resources and sophistication to sue, minus litigation costs.
When Congress says "not to exceed", a certain amount of money may come out of the Treasury--
Chief Justice John G. Roberts: It makes sense if you're looking at the reality of the budgeting process because in one case, that one line item appears on the Department of Interior budget; and in the other case, it appears somewhere else in the Judgment Fund budget.
And they can say it's not our fault.
The Judgment Fund -- the court made us do it--
Mr. Freeman: --Well, I don't think so, Your Honor.
The Judgment Fund is not a new thing.
The Judgment Fund is available only to pay judgments validly entered against the United States.
Now, we don't dispute that it's available to pay breach of contract damages; but, of course, a breach of contract requires a violation of -- a violation, a failure to perform a binding contractual promise.
Now, we think we've performed our promise here because our -- our promise was to pay the sums that Congress made lawfully available.
And we think that, to the extent Respondents think we promised to pay more than Congress explicitly said could be available, the Secretary had no authority to enter into that promise.
Justice Sonia Sotomayor: But that's true of every contract.
That's where I'm getting stuck on what your theory is.
The Anti-Deficiency Act says you can't spend more than you're given.
Justice Sonia Sotomayor: So every single contractor, under your logic, should know that when they sign a contract, the government can break it because if it doesn't have enough funds, it can't pay.
Mr. Freeman: And, Your Honor, that--
Justice Sonia Sotomayor: But -- so there's no real logic to your argument, other than to say we can't -- we're -- if the contract says "subject to appropriations", let's do away with Ferris, let's do away with Cherokee Nation and--
Mr. Freeman: --No, no--
Justice Sonia Sotomayor: --it just means that we pay you what we can.
That is emphatically not true.
As -- as an initial matter, as I've tried to explain before, there are very strict requirements in the government's contracting processes, such as the Federal Acquisition Regulation, that limit the ability of the government to make many promises it can't keep, particularly with regard to funding.
Justice Sonia Sotomayor: But what you're saying is you make two promises on the ISDA.
We're going to pay you your support costs, your administrative costs, in full, and we're going to retain the right to break that promise.
That's really what you're saying the ISDA says.
That's not right, Your Honor.
And I -- I'll answer this, and then I'd like to reserve the balance of my time.
The ISDA says our promise is to pay you what Congress lets us pay you.
It's not breaking our promise to limit it to appropriation; it is keeping our promise.
Justice Sonia Sotomayor: So you ignore all the language where it says we're going to pay you X amount, all the law that says you have to be reimbursed -- the tribes have to be reimbursed for all their costs; all of that is going to be ignored?
Mr. Freeman: Well, it's not that it's ignored, it's that section 450j-1(b) says, notwithstanding any other provision of this Act, and we think that's fairly clear.
I guess I'd like to start on the Ferris doctrine because it seems to me that is the fundamental issue in this case.
And the principle of Ferris -- and it's interesting to me that counsel for the government never once makes any reference to the Comptroller General's interpretation of the Ferris doctrine, which in the Redbook says, as plain as day, that in circumstances like this one, where the government has more contractors than it had -- than one, and those contractors are subject to an appropriation, and it cannot exceed that appropriation -- I think all of that language, frankly, is implied anyway -- the contract--
Justice Anthony Kennedy: So you say -- you say you don't want us to mention "not to exceed" in our opinion--
Justice Anthony Kennedy: --other than to say that it's irrelevant?
"Not to exceed" has a very significant role to play, Justice Kennedy, because--
Justice Anthony Kennedy: Does the Redbook talk about "not to exceed" as being any different from general appropriations?
Mr. Phillips: --The place where "not to exceed", I think, carries particular significance is that in the ordinary situation, we would be entitled to seek injunctive relief to take money from other sources within -- within the budget and get an injunction.
And that's very unique to the -- to this context.
Ordinarily, government contractors cannot seek injunctive relief.
This "not to exceed" language--
Justice Anthony Kennedy: Does the Redbook--
Mr. Phillips: --deprives us of that.
Justice Anthony Kennedy: --Does the Redbook refer to "not to exceed" -- the "not to exceed" language?
Mr. Phillips: I'm sorry, Justice Kennedy?
Justice Anthony Kennedy: Does the Redbook have -- refer to the "not to exceed" language?
Mr. Phillips: The Redbook doesn't -- well, actually, the Redbook does say that all of these phrases are essentially the same, which is that they--
Justice Stephen G. Breyer: I saw -- I read the Redbook.
I might have missed the part that you're about to cite to, because I'd like you to tell me where in the Redbook it says that a contractor who has a contract that says "subject to appropriations" and is then dealing with the law of Congress which says the appropriation will not exceed X million is then entitled to be paid on a contract where he and like contracts do exceed X million.
Where does is say that in the Redbook?
Mr. Phillips: --The Redbook--
Justice Stephen G. Breyer: I couldn't find it.
Mr. Phillips: --Well, the Redbook talks about subject to appropriations; it talks about--
Justice Stephen G. Breyer: I did read it.
I just would like to know what page you want me to read again.
I read the Chamber of Commerce brief.
The Chamber of Commerce brief says everybody knows the contractors are paid in this situation.
So I looked up the authorities that they cited.
I read the Redbook.
I read my other case of Cherokee.
I read Ferris.
I read Sutton.
I can't say I'm perfect at reading--
Justice Stephen G. Breyer: --but I couldn't find it.
Mr. Phillips: Justice Breyer--
Justice Stephen G. Breyer: So I would appreciate your referring me to those citations.
Mr. Phillips: --GAO Redbook 6-44--
Mr. Phillips: --says--
Justice Stephen G. Breyer: I have it in front of me, by coincidence.
Mr. Phillips: --This is in our brief at page--
I have the Redbook 6-44.
Chief Justice John G. Roberts: What page, for those of us who don't have it in front of us?
Mr. Phillips: --In my brief, it's on page 31.
Justice Stephen G. Breyer: I'm not saying it isn't there.
I just read through these pretty quickly.
I just need a little refresher.
If you look at -- I'm sorry -- 2 GAO -- well, I think you can use either of these: 2 GAO Redbook 6-28 to -- 29 talks--
Justice Stephen G. Breyer: Oh, I don't have that.
Mr. Phillips: --talks about "for" followed by a purpose and an amount has the, quote, "same effect as" -- quote --
"'words like "not more than" or "not to exceed". "
So, I mean, what they're saying is that all of this--
Justice Sonia Sotomayor: Could you give me that cite again.
2 GAO Redbook 6-28 to -- 29.
And I think the same--
That isn't quite my question.
My question was: I would like the authority for the proposition that when you have a set of contractors, and they read their contract, and it says $4 million, and then you discover that the amount of the contracts of the same kind in this category are more than $4 million, I want to know where in the Redbook it says that they get paid more than $4 million.
And if that's -- if that's normal practice, it must be there's a lot of authority for it.
So I just want to know what to read.
Mr. Phillips: --Well, here, 6-45 says, if a contract is but one activity under a larger appropriation, it is not reasonable to expect the contractor to know how much of that appropriation remains available.
Justice Stephen G. Breyer: But they aren't talking about there where it says specifically in the contract "subject to appropriations".
At least, I think they're not.
Now, I would like you right now to tell me, no, you're wrong; it does say that.
Mr. Phillips: Well, it says, if Congress appropriates a specific dollar amount for a particular contract--
Justice Stephen G. Breyer: They're distinguishing Sutton from Ferris.
Justice Stephen G. Breyer: They're trying to use that to distinguish Sutton from Ferris, and it's filled with, well, we're not sure about this because Sutton, which is Brandeis, which comes out the opposite way, did have a line appropriation, and I thought that just refers to the fact that because there's a line appropriation the contractor is on notice.
And when you do business with the government over a period of years, and it says subject to appropriation, not necessarily you but your lawyer, who is a good lawyer, should look up and see what the appropriation is or whether it was made.
I mean, that's what I--
Mr. Phillips: Justice Breyer, as a matter of policy -- you know, if Congress--
Justice Stephen G. Breyer: --No, no, not as a matter of policy.
I'm putting it as a question because that was my first reaction, and I expect you to say, no, Justice Breyer--
Mr. Phillips: --Well, clearly--
Justice Stephen G. Breyer: --you're wrong, and that isn't the practice, and here is what I read to show that isn't the practice.
Mr. Phillips: --Well, I guess I don't understand exactly how to answer that question, Justice Breyer, because--
Justice Stephen G. Breyer: By showing me where in the law it says -- and I don't want to repeat the question for the third time, but it says--
Justice Antonin Scalia: I wish you would.
I've lost the question.
Justice Stephen G. Breyer: --Well, here sometimes not everyone pays sufficient attention to these very clear questions.
Mr. Phillips: --I'm doing my best, Justice Breyer.
Justice Stephen G. Breyer: Where -- Look, hypothetical, four people, four identical contracts, the words appear, "subject to appropriation".
Justice Stephen G. Breyer: Each is for a million dollars.
Then you read the appropriation that was later made, and in that statute it says, "we hereby appropriate three million", and -- it is,
"the payments are not to exceed three million. "
Justice Stephen G. Breyer: All I want is the authority that says each of those four people can come in and get the $1 million, totaling four million.
I want the authority that says that.
Mr. Phillips: I mean, I would read Ferris.
It did not say anything about it in the contract.
Mr. Phillips: Well, I mean, Ferris has a limitation.
The government has already told us that subject to appropriation is implicit in every -- in every agreement anyway, so there's nothing special about putting in the words "subject to appropriation".
Justice Stephen G. Breyer: Oh, there certainly is.
Putting in the words gives the lawyer notice.
Mr. Phillips: Well, again, the only notice it gives is that there has to be enough money when you look at the appropriation to cover your contract.
Justice Antonin Scalia: Ferris did not say, as I recall, that you can't expect the contractor to have notice that appropriations have been limited.
It said you can't expect them to have notice as to how much of the expenditures under that appropriated act have been spent.
Isn't that the only thing it required notice of?
Justice Antonin Scalia: I would think, if you sign a contract, you better be sure that there are appropriations for it.
Mr. Phillips: --Clearly.
And that -- I mean, and, Justice Breyer, the Court's opinion in Cherokee said that the primary purpose of the subject to availability clause is to deal with the situation where you enter into the agreement ahead of the fiscal year, and so everybody knows that if Congress, for whatever reason, decides not to appropriate any money, there is no deal, and nothing happens.
Justice Anthony Kennedy: So, in your view, if the Tribe comes to the government, and they say, look, we've been looking at what you've done with the other tribes, you've appropriated $95 million, and the appropriation says,
"not to exceed $95 million. "
but go ahead and make this contract with us, anyway, no one cares.
And you say, go ahead and make it.
Mr. Phillips: Well, I mean, it seems to me it's the government's problem to sort it out.
Justice Anthony Kennedy: That's your position, isn't it?
But, again, put it in the context, Justice Kennedy, of the individual tribe.
Justice Ruth Bader Ginsburg: You can't get it from Cherokee.
I mean, yes, there's Ferris, and then Cherokee--
Justice Ruth Bader Ginsburg: --is relying on Ferris; but, Cherokee is very careful to point out that there were funds to cover--
Mr. Phillips: No question about it, Justice Ginsburg.
I don't think this case is controlled by Cherokee.
I do think Cherokee answers the question of how far can you carry the "subject to availability" language.
I don't think it gets the government anywhere near home.
And then the question is, what do you do with the "not to exceed" language.
And I would suggest there is that, that's no different, frankly, from Ferris or any other situation, because what the -- Congress operates against the backdrop of Ferris, which is a 120-plus-year-old doctrine that has been allowed to stay in place by Congress for that entire time.
And as the Chamber of Commerce tells us, this is a rule that every contractor takes as an article of faith in dealing with the United States Government.
Justice Antonin Scalia: Well, am I correct that what the government is arguing is that the fact that this limitation was included in the particular contract makes it different from Ferris?
Mr. Phillips: Well, it's hard to make that argument because the "not to exceed" language, at least, that comes out of the -- that's in the appropriations provision.
That's not in the contract itself.
The contract itself simply says subject to appropriations.
Justice Antonin Scalia: Which Ferris did not.
Did the Ferris contract say that?
Mr. Phillips: It's -- Ferris doesn't have the "subject to appropriation", but the Ferris contract says the appropriation limit is X.
Justice Stephen G. Breyer: It does?
Where do you get -- I couldn't find the contract.
The language in Ferris is,
"a contractor who is one of several persons to be paid out of an appropriation is not chargeable with knowledge of its administration. "
Now, Dyk says, in his opinion, that one difference from Ferris is they wrote the idea into the contract, saying you're subject to appropriation to get -- to make that lawyer chargeable with knowledge.
And the second thing in Ferris is that it was an individual who went off on his own in the administration and paid money that he shouldn't have paid.
It should have been over here for the contract.
In this case, it is an instance where Congress itself required the money to be paid, as it was paid, and didn't provide enough.
So that's where I am with Ferris, which is a big question mark.
And I guess you can talk about that, but all I wanted to know is what is well established in this field.
Justice Stephen G. Breyer: I don't want to write something that suddenly upsets what is well established.
Well, I take this, then, straight from the Red Book again.
"It is settled that contractors paid from a general appropriation are not barred from recovering for breach of contract, even though the appropriation is exhausted. "
And so even though -- and there is nothing in -- there's no limitation--
Justice Stephen G. Breyer: --as it says in the contract, you are barred, you are barred from recovering if we don't appropriate enough money.
Should it say that wouldn't matter?
Mr. Phillips: --Well, it would say that if you don't appropriate enough money for the specific contract, yes.
I think that's clearly what Sutton holds.
Is that if -- if Justice Scalia and I have an agreement, and the appropriation goes to $100 for our agreement, and the contract says $500, I'm out of luck for the extra $400.
Justice Sonia Sotomayor: Mr. Phillips, this is an unusual situation with the tribes because in the normal "not to exceed" appropriation by Congress, the government rightly says we have the power to not contract.
And in military contracts and others, we have a for convenience cancellation.
We have all sorts of things that protect us from the deficiency.
But this is a unique situation because the government, on the one hand, despite their protestations to the contrary, are forced to accept these contracts.
Justice Sonia Sotomayor: And on the other hand, Congress is saying, don't pay more on them.
We are telling you to accept more payment than we are going to give you.
Justice Sonia Sotomayor: Should we create a special rule for this -- why shouldn't we create a special rule for this unique situation?
Mr. Phillips: Because, essentially, what you're doing is putting the backs of this problem -- putting the burden of this problem on the backs of innocent contractors who--
Justice Antonin Scalia: Well, is it--
Mr. Phillips: --Who entered into in good faith these agreements.
Justice Antonin Scalia: --Well, is it just a question of our creating a new rule; or, rather, is the proposition whether the tribes, when they entered into this, should have realized that because of the peculiarity of these contracts, that they had to be entered into, that the rule which otherwise would apply does not apply?
It ought to be a question of expectation of the tribe, should it not?
Mr. Phillips: Well, I would -- I would suggest a couple things about that.
I mean, I think in general it's reasonable to look for the -- obviously, the intent of the parties and the expectations of the parties.
This case went off on summary judgment that we lost, I mean, even on a -- so we didn't have an opportunity for any analysis of this.
But the reality is, is that from the Tribe's perspective, they recognize, because of Ferris, and because of the way the Comptroller General has interpreted Ferris, that they are under a duty to make sure that there is an appropriation that covers this contract, that the amount, purpose, time requirements are all satisfied with enough money to accomplish that.
And then, of course, we have the obligation to perform, which, of course, that's the other half of the equation here.
And, Justice Sotomayor, that's why I wouldn't say--
Justice Ruth Bader Ginsburg: --But you don't -- you don't have the obligation to perform.
In a term of the contract, that if there are lack of sufficient appropriations, performance by either party is excused.
Mr. Phillips: --Well, that -- yes, Justice Ginsburg.
But the problem is, we don't know the answer to that until after the year of performance is done, or at least months into the performance.
And sometimes, literally, after we've already performed.
Justice Anthony Kennedy: Suppose you did know.
Suppose the Tribe knew that the 95 million -- let's assume that that's the not to exceed amount -- had already been obligated.
Could the Tribe then go ahead and make the government -- a contract with the government, and would the government have to make that contract, in your view?
Mr. Phillips: I mean, that is the Southern Ute case.
And I -- and, certainly, you can make an argument to that.
The government has an argument on the other side.
Justice Anthony Kennedy: Is it your argument that the answer to that is yes?
Mr. Phillips: The argument is, it appears that Congress intended to require them to enter into that agreement.
You know, the idea of Congress requiring an official to enter into an agreement that violates a criminal statute is at least a difficult concept to sort of wrap your mind around.
Justice Anthony Kennedy: Isn't this more specific language than the general language?
Doesn't this specific language, not to exceed, supersede the general obligation to make the contract?
The "not to exceed language" is meaningless.
Mr. Phillips: No, but--
Justice Anthony Kennedy: You say it's meaningless.
Mr. Phillips: --No, Justice Kennedy.
I told you what the meaning of the "not to exceed" language is.
The BIA or anyone else at the Interior and say, give us money from another source in order to pay for our contract.
And we can't use the injunctive relief that's otherwise available to us for that purpose.
So that language has very significant importance in limiting what our options are--
Justice Ruth Bader Ginsburg: Mr. Phillips--
Mr. Phillips: --in a circumstance where we are not being paid enough under the -- the agreement.
Justice Ruth Bader Ginsburg: --do I understand your position to be that, yes, the cap has meaning, because in order to exceed the cap, the tribe has to sue; so, any tribe that sues, for any tribe that sues, the cap is meaningless?
It's only for the ones who are not sophisticated enough to sue.
They are just stuck with what Congress said.
So it seems to me that would be a very bizarre scheme to say that; that you have a cap, but the cap is meaningless if you bring a lawsuit.
I -- I mean, I -- it seems to me that we can't -- I mean, aside from bringing a lawsuit, I mean, we -- we could go to the Secretary and say, we don't have enough money to satisfy our contract, would you take money from some other source in order to accomplish that.
Because, in the ordinary course, that's not uncommon to re -- re-jigger the appropriation.
Justice Antonin Scalia: Do you think it protects these -- these unsophisticated tribes who don't know enough to sue by not allowing anybody to sue?
Mr. Phillips: Well, that -- yes, there is--
Justice Antonin Scalia: Does that make their situation better somehow?
Mr. Phillips: --To be sure, that would not make our situation any better, but--
Justice Ruth Bader Ginsburg: My question is whether the cap was meaningless.
And I think your answer is, yes, for anyone who sues, the cap is meaningless.
It -- I don't -- I don't think it does that.
It -- it -- it places inherent limitations -- I mean, it says specifically that the Secretary is not authorized to shift money around in order to take care of this particular problem in this particular year that otherwise would be available to us.
Justice Anthony Kennedy: You just go to the judgment--
Justice Anthony Kennedy: --You just go to the judgment fund--
Then, we--
Justice Anthony Kennedy: --which makes it meaningless.
Mr. Phillips: --Well, ultimately, it means that the burden of it will not fall on the tribes.
It is -- it does mean that.
But -- and let's be clear about this.
The judgment fund -- this is not simply going to the judgment fund and asking for our contract support costs to be paid.
Our argument here is that there has been a breach of contract, and we are entitled to the damages for the breach of contract, whether those are reliance damages or restitutionary damages, whether we -- whether we are supposed to get what we expected out of the deal or put back in the position we would have been in.
Justice Elena Kagan: Mr. Phillips, if you look at this situation, it seems pretty clear that Congress did want to do something, which was to limit the amount of money that was going to the tribes under these contracts.
Do you think that there is a way that Congress can do that--
Mr. Phillips: Oh, sure.
Justice Elena Kagan: --consistent with this scheme that's set up by the statute?
How could Congress do that?
You know, if -- if -- if they can't do it this way, how could they?
Mr. Phillips: Well, the easy way would be to impose specific limitations in -- in every one of the contracts, which -- which, frankly, if you read appropriations bills, which I hate to say I have occasionally done--
Justice Elena Kagan: When you say specific limitations, what would that look like?
Mr. Phillips: --It would look like -- for the agreement between the United States and Ramah Navajo for -- for contract support costs in this particular -- for taking over the police department, the contract support costs shall not exceed $150,000, period.
That's the total appropriation.
And if we look at our contract -- and there is a specific number in the contract -- and that contract says $174,000, then we know that we are out of luck for the $24,000.
We've been put on specific notice--
Justice Samuel Alito: For any particular year, are they all entered into it at about the same time?
Mr. Phillips: --What's that, Justice Alito?
Justice Samuel Alito: For any particular fiscal year, are all of these contracts entered into by a particular date?
Mr. Phillips: Yeah, nothing is all that easy, obviously.
Some of them enter into it on a fiscal year basis.
Some of them enter into it on a -- on a -- on a calendar year basis.
And, frankly, the -- part of the problem is when does the government get around to signing these agreements.
And, also, there are 12 regions.
I mean, part of the reason -- I would like to spend a second talking about the comment that, you know, we have this fair and equitable scheme in place in which we are allocating moneys out, when the reality is, is that there is substantial evidence in the record, even though we have not had an opportunity to make a full record, that the -- that the -- that the Bureau makes mistakes in 40 percent of these contractual arrangements.
And I know my -- my colleague is going to dispute that, but the truth is we've known that for years.
They just make mistakes, and people get impaired -- their contract rights are impaired on that basis.
This is not some kind of an inequitable scheme that's operating here.
There are 12 different regions operating in 12 different ways.
Some people get money, some people get 300 percent of theirs, some people get zero percent of theirs.
Justice Sonia Sotomayor: Mr. Phillips, how does Congress do this without upsetting the entire scheme?
Knowing that these contracts are not all signed on one day, that there are 12 regions, that the negotiations go over time, how could Congress achieve the scheme that the government wants now?
How would it write this contract?
Well, the easy way would be to take away the requirement that the government has to enter into all of these contracts at the request of the tribe.
And -- and -- and that's clearly available.
If they want to go down that path, they can do that in a heartbeat.
And then they have all of the discretion they want -- they want to apply under these circumstances.
So, I mean, there's -- obviously, there is a bit of, as we said in the brief, schizophrenia.
And I have some misgivings about describing Congress that way, but there is some schizophrenia in how they approach this problem.
Justice Antonin Scalia: Do you have to solve it contract by contract?
Couldn't there be a -- a provision in the -- in the law which -- which says that, where appropriated funds are inadequate to cover the totality of -- of -- of costs under this statute, it will be apportioned as follows?
Justice Antonin Scalia: Or the Secretary will apportion it?
You wouldn't even have to do it contract by contract; right?
I -- I mean, I think that would--
Justice Antonin Scalia: You would prefer contract by contract for your clients.
Mr. Phillips: --Well, I just think it's been noted--
Justice Antonin Scalia: Oh, absolutely--
Mr. Phillips: --but, you know, I don't disagree with that.
Look, and as we argued in our brief, there are three or four different ways that Congress can fix this problem going forward, but -- and that's -- and that's the message, I thought, from Justice Sotomayor, is why don't we let Congress fix the problem and allow the background principles of Ferris, as interpreted by the Comptroller General, to apply in this case in order to resolve the contract dispute that's properly, obviously, before the Court at this point.
Chief Justice John G. Roberts: I think -- I think this may have been asked, and I'm not sure of the -- I understood the answer.
This is -- is this on an ongoing, forward looking basis?
In other words, you enter into the contracts, and then you wait and see whether there are appropriations?
Typically, what happens is you enter into the agreement sometime just before the appropriation comes down.
It's -- it's -- it's usually pretty close, because--
Chief Justice John G. Roberts: Well, so doesn't it make -- I mean, doesn't the system that the government is operating under make a lot of sense?
Because let's say the tribe says, look, we need a million dollars.
The Secretary agrees to it.
And then I assume the two of them get together and say, well, we'll try to get the appropriation for it.
You know, you understand we may not get it, but this is how much you need, we'll go back and get it.
If you get it, that's great; if you don't, well, then that's--
Mr. Phillips: --And -- and, Mr. Chief Justice, if they did that on a -- on a tribe-by-tribe, contract-by-contract basis, I -- I wouldn't have any problem with that, because then you're on notice.
But when they say to you, okay, fine, here's -- you know, this is -- there is your contract support cost provision, there is a specific number in there, 1.3.78 dollars and 63 cents, that's what you ought to get, and we get an appropriation that comes back in that says the government will -- that, you know, we have appropriated $100 million for contract support costs.
There are 330 other tribes out there potentially with contracts that are involved here.
It is -- and -- and just to put it in context, we are talking about -- you know, many of these tribes are in incredibly remote situations.
They don't have access to all the other information about what's going on.
And the real question is, should you impose--
Chief Justice John G. Roberts: --Are you suggesting that--
Mr. Phillips: --that on the tribes.
Chief Justice John G. Roberts: --Are you suggesting that Congress has to go through each of those contracts and say, this is how much we are going to appropriate, this is how much?
Mr. Phillips: I think that's -- I actually think that would be the fairer way to do it.
And I don't think it would be as burdensome as -- as your question implies because, again, what else does staff have better to do than to sit down and put all those appropriations together.
Chief Justice John G. Roberts: Well, the question is whether it's the staff in Congress that's going to do it or the staff at the Department of the Interior?
Chief Justice John G. Roberts: And I suppose Congress can reasonably determine that the people at Interior know better about how to do it than we do.
But then -- then they could do it by -- by -- expressly by reference.
I mean, if, in fact, Interior has set it out that way and has it all done, then they can just incorporate it into the statute anyway.
I mean, there are simple ways to do it.
There are broader ways to do it.
And as I said to Justice Sotomayor, clearly Congress could simply, you know, absolve the government of its responsibility to enter into any contract that a -- that a -- when an Indian tribe shows up at their doorstep.
All of those seem to me preferable than saying to the tribes, after they have fully performed their side of the deal, okay, I'm sorry, we are not going to pay you.
The -- the other thing that's odd about this--
You keep saying that, but I thought in your earlier answer you said that the contracts are generally signed by the time of the appropriation.
Justice Sonia Sotomayor: Where is that in the cycle of performance?
Is that at the beginning of performance?
Mr. Phillips: That's at the beginning of performance.
But -- but what we find out about the notices that we are -- that we've later received is at some point, we're sending you 75 percent in some situations, or we're going to send you exactly the same amount of money you got last year, even though that won't cover it.
Justice Sonia Sotomayor: So the tribes -- even when the appropriation comes out, they don't know how much the Department has contracted with other tribes.
We haven't--
Justice Sonia Sotomayor: So they're performing until they get that notice later on.
Mr. Phillips: --Exactly.
And, candidly, assume that -- either one of two things will happen.
Either we will ultimately be paid in full, which has happened -- I mean, the last year, they were in fact paid in full.
Or alternatively, that they will have access to the judgment fund in order to -- to get the recovery they are otherwise entitled to.
Justice Elena Kagan: Mr. Phillips, do you think -- and the long question here is what did Congress want.
And what -- one answer might be Congress wanted exactly what the government says it wanted.
But another answer might be something different, that actually, Congress wanted there to be unlimited funds for these tribes, but that it wanted to shift the costs of some of those funds to the judgment fund outside of the Interior budget.
Justice Elena Kagan: Do you -- I mean, do you contest the government's view of what Congress wanted here?
Mr. Phillips: Well, I think the question is it's unclear what Congress really wanted in this case, and therefore, you ought to construe the -- the scheme in a way that is most favorable to the tribes.
And if that means that the scheme operates so as to protect the integrity of the appropriations process and the spending process for a particular year, and prevents us from being able to seek relief outside of this contract support cost appropriation limitation, that makes perfect sense to me, leaving open obviously the availability of the judgment fund at the end of the day so that the tribes do not in fact have to bear the full burden of -- of this arrangement as opposed to -- as opposed to anyone else.
I mean, that's -- again, we do provide -- we've performed the services.
We do it in good faith.
Under those circumstances, it seems to me that's the classic situation in which we should receive full compensation.
Mr. Freeman, you have 4 minutes remaining.
REBUTTAL ARGUMENT OF MARK R. FREEMAN ON BEHALF OF THE PETITIONERS
Mr. Freeman: Thank you--
Justice Sonia Sotomayor: Do you dispute Mr. Phillips' statement that the tribes don't know how much they're getting until some point further into the performance cycle?
Mr. Freeman: --In part, Your Honor.
As I mentioned earlier, for the first many years in this scheme, we did a uniform pro rata distribution methodology.
The tribes came to us and said, look, that's a problem for us because we don't have any budget transparency; we can't see how much we're going to get.
So we adopted this policy in 2006.
And one of the principal elements of that policy is that it guarantees that, if -- as long as Congress appropriates as much money as it did in the previous fiscal year, which it generally has, the tribe will get immediately, like within 2 weeks, the exact amount of money that it received in the previous year.
And that money comes immediately.
They can use it however they want.
It's not subject to apportionment.
Unlike most Federal agencies, we don't dole it out.
They get it right away.
Now, the question then becomes what to do with any additional money that Congress has appropriated, and the policy provides for distribution of that money on what we call a bottoms-up basis.
We give it to the tribes that are the farthest away from 100 percent of funding.
That resolution was negotiated with the tribes and, indeed, with some counsel for Respondents.
It's, we think -- and I might be wrong about this -- but we think that that's the solution that the tribes want, if the caps have any effect.
Justice Elena Kagan: I guess what I don't understand about the government's argument, Mr. Freeman, is exactly what the contractual rights of the tribes become.
I mean, as I -- this is supposed to be a contract, and we've held that it's a contract, and usually contracting parties have rights to something.
Justice Elena Kagan: So what do they have a right to in your view?
Mr. Freeman: Well, first of all, let's make clear -- let's make sure that we're not--
Justice Elena Kagan: That was -- that was a straightforward question.
Mr. Freeman: --Well, they have a right, Your Honor, in the first instance to the principal promise that's under any ISDA contract, which is we give the amount of money that the Secretary would have provided for the program funds, for operational--
Justice Elena Kagan: No, but what do they have a right to with respect to these additional overhead costs?
Mr. Freeman: --Contract support costs.
They have a right as a class to the distribution of every dollar that Congress appropriates, and for every contractor--
Justice Elena Kagan: What does each individual tribe have a right to?
Mr. Freeman: --A proportionate share based on the Secretary's policy for the distribution of these in light of the caps.
Justice Elena Kagan: So you think they do have a right to a pro rata share?
Mr. Freeman: --We think that--
Justice Elena Kagan: In other words, the Secretary could not say, oh, you know, these tribes have been doing a better job, so we'll give to them; or these tribes need it more, so we'll give it to them.
You think that there's a contractual right to a pro rata share.
Mr. Freeman: --We think there's a contractual right to -- and, in fact, the contracts often reference these policies directly.
For example, page 123 of the joint appendix, one of the contracts in this case says you'll be paid according to the distribution policies adopted by the Secretary.
So in that case, yes, we bound ourselves--
I didn't think that was responsive.
Does the Secretary -- Justice Kagan can defend her own question -- but does the Secretary have the discretion to adopt something other than a pro rata distribution when there are not sufficient appropriations?
Mr. Freeman: --We think within a range of reasonable solutions after consultation with the tribes, yes.
Justice Ruth Bader Ginsburg: You must that question--
Justice Sonia Sotomayor: The system that's in place does not--
Justice Ruth Bader Ginsburg: --You must answer that question "yes"--
Justice Ruth Bader Ginsburg: --because that's exactly what the Secretary did.
Justice Ruth Bader Ginsburg: You explained that it was pro rata.
Justice Elena Kagan: This is a very -- this is a very strange kind of contractual right.
The -- the contracting tribe has a right to have the Secretary to use discretion to decide how much the contracting tribe gets.
Mr. Freeman: --Respectfully -- respectfully, Your Honor, that is an exaggeration.
Congress has appropriated since 1994 more than $2.3 billion in contract support cost funds.
We've distributed all of that money to the tribes.
All of the tribes here have gotten substantial sums.
Justice Elena Kagan: No, I'm not contesting -- I mean, clearly you think and the Secretary thinks that there's an obligation to distribute all that money.
Justice Elena Kagan: And -- and I don't think anybody disagrees with that.
The question is what each individual tribe has a contractual right to.
Mr. Freeman: May I answer the question, Your Honor?
Your Honor, once it is clear the caps control the total amount of money that the Secretary may spend, every further question is a question of allocation.
We think we have the policy that's right -- it was negotiated with the tribes and counsel for Respondents -- but if we're wrong about that, we can have that fight another day.
The question here is whether the caps define the maximum amount of money that the Secretary may spend, and we think they do.
Transcript: Chief Justice John G. Roberts: In case 11-551, Salazar versus Ramah Navajo Nation.
Justice Sonia Sotomayor: This case concerns the Indian Self Determination and Education Assistance Act or ISDA.
SALAZAR v. RAMAH NAVAJO CHAPTER. The Oyez Project at IIT Chicago-Kent College of Law. 23 November 2014. <http://www.oyez.org/cases/2010-2019/2011/2011_11_551>.SALAZAR v. RAMAH NAVAJO CHAPTER, The Oyez Project at IIT Chicago-Kent College of Law, http://www.oyez.org/cases/2010-2019/2011/2011_11_551 (last visited November 23, 2014)."SALAZAR v. RAMAH NAVAJO CHAPTER," The Oyez Project at IIT Chicago-Kent College of Law, accessed November 23, 2014, http://www.oyez.org/cases/2010-2019/2011/2011_11_551. Footer Links About