Opinion ID: 692074
Heading Depth: 2
Heading Rank: 1

Heading: Interest as Part of the Plaintiffs' Damages

Text: 10 The government's appeal presents a single issue: whether the Court of Federal Claims erred in ordering the United States to pay interest to each successful plaintiff from the date of each per capita distribution to the members of the Hoopa Valley Tribe. See Short IV, 12 Cl.Ct. at 43. The government continues to argue on appeal that no statute entitles the plaintiffs to prejudgment interest on their awards. See 28 U.S.C. Sec. 2516(a) (1988 & Supp. V 1993) (Interest on a claim against the United States shall be allowed in a judgment of the United States Court of Federal Claims only under a contract or Act of Congress expressly providing for payment thereof.). Although we agree that no statute entitles the plaintiffs to prejudgment interest, we see the investment statutes as providing a basis for the award of interest as part of the plaintiffs' damages. See 25 U.S.C. Secs. 161a, 161b, 162a (1988); Short IV, 12 Cl.Ct. at 43; Short V, 25 Cl.Ct. at 727. 11 Under 25 U.S.C. Secs. 161a, 161b, and 162a, simple interest is paid on Indian Money, Proceeds for Labor (IMPL) accounts. 2 Section 161a, for example, provides that [a]ll funds ... held in trust by the United States ... to the credit of Indian tribes, upon which interest is not otherwise authorized by law, shall bear simple interest at the rate of 4 per centum per annum. 25 U.S.C. Sec. 161a; see also id. Sec. 161b (All tribal funds arising under Sec. 155 ... shall bear simple interest at the rate of 4 per centum per annum....); id. Sec. 162a (providing for the investment of tribal funds in bank accounts at interest rates higher than 4% per annum). The government acknowledges that these statutes provide for the payment of interest on trust funds held by the United States for the benefit of Indians. It argues, however, that interest is payable only on money still held in such a trust fund. We do not agree. These statutes, in conjunction with the government's fiduciary duty to Indian tribes, see United States v. Mitchell, 463 U.S. 206, 224-26, 103 S.Ct. 2961, 2971-73, 77 L.Ed.2d 580 (1983) (Mitchell II ), give the plaintiffs a substantive right to damages, including interest as explained below. 12 Mitchell II held that 25 U.S.C. Sec. 407, which governs the sale of timber on unallotted lands such as the Hoopa Valley Reservation, and the other timber-management statutes establish the 'comprehensive' responsibilities of the Federal Government in managing the harvesting of Indian timber. Id. at 222, 103 S.Ct. at 2971 (quoting White Mountain Apache Tribe v. Bracker, 448 U.S. 136, 145, 100 S.Ct. 2578, 2584, 65 L.Ed.2d 665 (1980)). The regulations promulgated under these statutes establish a fiduciary relationship between the United States and the Indians. See Mitchell II, 463 U.S. at 224-26, 103 S.Ct. at 2971-73. Thus, the statutes and regulations can fairly be interpreted as mandating compensation by the Federal Government for damages sustained for breach of fiduciary duty. Id. at 226, 103 S.Ct. at 2972-73; accord Short III, 719 F.2d at 1135. 13 Such a breach of fiduciary duty occurs when funds held in trust are mishandled, which can arise in a number of ways. For example, the funds might be wrongfully disbursed. See, e.g., Short III, 719 F.2d at 1135 (holding, on the basis of Mitchell II, that the pervasive statutory scheme present here creates an actionable fiduciary duty when the Secretary wrongfully distributes timber proceeds in a discriminatory fashion). Or, the funds might be misappropriated or mismanaged. 14 Once a breach of the government's fiduciary duty is established, the question becomes the appropriate measure of damages. In Peoria Tribe v. United States, 390 U.S. 468, 88 S.Ct. 1137, 20 L.Ed.2d 39 (1968), the Court recognized that interest may be appropriately included in a damage award against the United States for breach of its obligations to an Indian tribe. That case arose under a treaty that obligated the government to dispose of certain tribal lands at a public auction and accrue interest on the proceeds until distribution. See id. at 469, 88 S.Ct. at 1137-38. The government violated the treaty by selling most of the land privately at lower prices than it would have received at a public auction. See id. at 469-70, 88 S.Ct. at 1137-38. The tribe sued both for the deficiency in the amount received (approximately $170,000) and for the interest that would have accrued had the government received that amount. See id. The Supreme Court reversed a Court of Claims judgment denying interest to the tribe. The Court acknowledged that the United States is generally not liable for interest on claims against it, id. at 470, 88 S.Ct. at 1138, but considered interest to be part of a proper damage award. See id. at 471, 88 S.Ct. at 1138-39 (The issue ... concerns the measure of damages for the treaty's violation in the light of the Government's obligations under that treaty.). 15 Here, as in Peoria Tribe, the government had a statutory obligation to hold funds for certain Indians. The government was further obligated to accrue interest on those amounts until distribution. See 25 U.S.C. Secs. 161a, 161b, 162a. The government violated its obligations by disbursing funds belonging to the plaintiffs to the Hoopa Valley Tribe members instead, to the fiscal detriment of the plaintiff non-Hoopa Indians. Therefore, the government owes the plaintiffs interest, not as interest on their damages, but as part of the damage award itself. See Peoria Tribe, 390 U.S. at 472, 88 S.Ct. at 1139; see also Cheyenne-Arapaho Tribes of Indians v. United States, 512 F.2d 1390, 1393-94, 1396, 206 Ct.Cl. 340, (1975) (holding that the government was obligated to pay interest when it mismanaged funds that were part of the same IMPL accounts at issue in this case). 16 Were we to accept the government's position, that interest would be payable only on money still held in trust, the principles of Mitchell II would apply only in the narrow circumstance of refusal to disburse funds payable to Indian tribes. There is no support in that case or our cases for such a limitation; indeed, the Court of Claims judgment affirmed by the Supreme Court in Mitchell II was that a damage recovery under 25 U.S.C. Secs. 161b and 162a for mismanagement of timberlands and their proceeds should include interest. See Mitchell v. United States, 664 F.2d 265, 275, 229 Ct.Cl. 1 (1981). Nor would such a result be consistent with the government's high fiduciary duty to the Indian tribes. See, e.g., Seminole Nation v. United States, 316 U.S. 286, 296, 62 S.Ct. 1049, 1054, 86 L.Ed. 1480 (1942) (holding the United States to the most exacting fiduciary standards); American Indians Residing on the Maricopa-Ak Chin Reservation v. United States, 667 F.2d 980, 990, 229 Ct.Cl. 167 (1981) (The standard of duty as trustee for Indians is not mere reasonableness, but the highest fiduciary standards.); see also Felix S. Cohen, Handbook of Federal Indian Law 541 (1982 ed.) (Litigation in timber cases has resulted in the imposition of strict fiduciary duties on the United States in its administration of tribal timber operations.). Instead, we agree with the Court of Federal Claims that [t]he government may not eliminate liability for interest mandated by statute simply by wrongfully disposing of the principal to others. Short IV, 12 Cl.Ct. at 43; see also United States v. Gila River Pima-Maricopa Indian Community, 586 F.2d 209, 216, 218 Ct.Cl. 74 (1978) (Interest as damages may not be awarded absent a treaty or statute specifically calling for interest to be paid.... Such a statute exists for 'Indian Moneys, Proceeds of Labor' (IMPL) funds, and ... interest should be awarded for payments made from such funds.); cf. Coast Indian Community v. United States, 550 F.2d 639, 655, 213 Ct.Cl. 129 (1977) (25 U.S.C. Secs. 161 and 161a are statutory exceptions to the general rule that interest from the date that the claim arises until date of judgment is not awarded in breach of trust cases). In other words, the amount of interest that, by statute, should have been accumulating on funds wrongfully disbursed by the government is properly viewed as part of the damages resulting from a breach of the trust. Mitchell II, 463 U.S. at 226, 103 S.Ct. at 2973. This is appropriate because the plaintiffs have not received the benefit over the years of the funds that were wrongfully disbursed to others. As the court below recognized, we are to assume that, but for the discriminatory payments to the Hoopa Valley Tribe members, the plaintiffs' rightful shares of the timber proceeds would still be accruing interest as provided by statute. See Short IV, 12 Cl.Ct. at 43. 17 This result is not premised on notions of fairness to the plaintiffs; rather, it is the proper measure of damages for wrongfully disbursed funds under this statutory scheme. Where, as here, IMPL funds were at one time held in trust accounts in which they were statutorily required to accumulate simple interest, see Short I, 486 F.2d at 571, such interest must be part of the plaintiffs' damage award. 3 See, e.g., Manchester Band of Pomo Indians, Inc. v. United States, 363 F.Supp. 1238, 1244-48 (N.D.Cal.1973); Menominee Tribe of Indians v. United States, 101 Ct.Cl. 10, 18, 1944 WL 3683 (1944). Thus, under Peoria Tribe, the plaintiffs are entitled to their shares of the timber proceeds plus interest from the date of each distribution, which was when the breach of fiduciary duty occurred, until the money is paid over. Peoria Tribe, 390 U.S. at 472, 88 S.Ct. at 1139 (quoting United States v. Blackfeather, 155 U.S. 180, 193, 15 S.Ct. 64, 69, 39 L.Ed. 114 (1894)).