Court Opinion

ID: 2668620
Source: CourtListenerOpinion
Date Created: 2014-04-04 15:21:42.912344+00
Date Added: 2024-06-11T12:12:45.735926
License: Public Domain

UNITED STATES DISTRICT COURT
                            FOR THE DISTRICT OF COLUMBIA

QUANTUM ENTERTAINMENT, LTD.,                   :
                                               :
                       Plaintiff,              :
                                               :
                       v.                      :       Civil Action No.:       07-1295 (RMU)
                                               :
UNITED STATES DEPARTMENT                       :       Document Nos.:          16, 17
OF THE INTERIOR,                               :
BUREAU OF INDIAN AFFAIRS,                      :
                                               :
                       Defendant.              :

                                    MEMORANDUM OPINION

    GRANTING IN PART AND DENYING IN PART THE PLAINTIFF’S MOTION FOR SUMMARY
      JUDGMENT; DENYING THE DEFENDANT’S MOTION FOR SUMMARY JUDGMENT

                                      I.   INTRODUCTION

       The plaintiff, Quantum Entertainment Limited (“QEL”)1, and the defendant, the U.S.

Department of the Interior (“DOI”) Bureau of Indian Affairs (“BIA”), filed cross-motions for

summary judgment on the question of whether the DOI’s Interior Board of Indian Appeals (“the

Board”) violated the Administrative Procedure Act (“APA”), 5 U.S.C. §§ 701, et seq., by

promulgating a decision adverse to the plaintiff. Stemming from the administrative review of a

contract to which the plaintiff was a party, the Board determined that, under the applicable

statute, the contract required the BIA’s approval in order to be valid. The Board further

concluded, that because the plaintiff failed to obtain the BIA’s approval, the contract was

invalid. Because the court determines that the Board failed to articulate a reasoned basis for

certain determinations central to its holding, the court grants in part the plaintiff’s motion for

1
       The plaintiff, QEL, is a New Mexico limited liability company that, among other things, provides
       consulting and management services to gas distribution businesses. Admin. Record (“AR”)
       at 0131.
summary judgment and remands the Board’s decision that the plaintiff’s contract was invalid.

The court denies the parties’ motions in all other respects. Accordingly, the court remands this

case to the Board to explain its decision consistent with this opinion.

                                      II.    BACKGROUND

                                       A.    Factual History

       On August 1, 1996, the plaintiff entered into a management agreement (“Agreement”)

with the Santo Domingo Pueblo (“Pueblo”)2 and Kewa Gas Limited (“Kewa”).3 AR at 0131.

The Agreement was for an initial term of ten years, during which time the plaintiff managed a

gas distribution business owned by Kewa on lands leased by Kewa from the Pueblo. Id. at 0046.

The agreement was never submitted to or approved by the Secretary of the DOI. AR at 0833-34.

The parties to the Agreement intended to benefit from a tax exemption available to Indian tribes.

Id. at 0046, 0827. The parties to the Agreement performed under the Agreement until 2003

when the governor the Pueblo sought BIA review of the Agreement, beginning the

administrative process culminating in this lawsuit. Id. at 0828, 0052.

                   B.   Legislative, Administrative and Procedural History

       Congress first enacted in 1871, as part of an appropriations bill, and in 1872, as

permanent legislation, what later was codified at 25 U.S.C. § 81 (“Old Section 81”). Id. at 0828

& n.2. From 1871 until 2000, with minor exceptions not relevant here, the text of Old

Section 81 remained substantially unchanged as follows:

2
       The Pueblo is a federally recognized Indian tribe and owns 100% of the issued and outstanding
       shares of capital stock of Kewa. AR at 0042, 0055, 0131.
3
       Kewa is a corporation incorporated under the laws of the Pueblo and registered with the State of
       New Mexico as a foreign, for-profit corporation. AR at 0055-0056, 0084.

                                                   2
       No agreement shall be made by any person with any tribe of Indians . . . for the
       payment or delivery of any money or other thing of value . . . in consideration of
       services for said Indians relative to their lands . . . unless such contract or agreement
       be executed and approved [by the Secretary of the DOI (“Secretary”)] . . . . All
       contracts or agreements made in violation of this section shall be null and void, and
       all money or other thing of value paid to any person by any Indian, tribe, or any one
       else, for or on his or their behalf, on account of such services, in excess of the
       amount approved by the . . . Secretary for such services, may be recovered by suit
       in the name of the United States.

25 U.S.C. § 81 (1994).

       Congress enacted Old Section 81 out of concern that “claims agents and attorneys

working on contingency fees [were] routinely swindl[ing] Indians out of their land, accepting it

as payment for prosecuting dubious claims against the federal government.” United States v.

Turn Key Gaming, Inc., 260 F.3d 971, 976-77 (8th Cir. 2001) (citing Cong. Globe, 41st Cong.,

3d Sess. 1483, 1483-87 (daily ed. Feb. 22, 1871)); see also id. at 976 n.6, 977 n.7 . Congress’s

act of legislative protection, through the enactment of Old Section 81, stems from the federal

government’s trust responsibility to Indian tribes. See Mark A. Smith, Contracting with Tribes

under 25 U.S.C. § 81, 20-APR PROB & PROP. 8, 10 (2006) (describing briefly the genesis and

development of the federal government’s moral obligation and fiduciary duty to Indian tribes).

       In 2000, however, Congress amended Old Section 81 as part of the Indian Tribal

Economic Development and Contracts Encouragement Act of 2000. 25 U.S.C. §§ 71, 81, 476.

This “amendment” was intended to replace Old Section 81, as the changes to the text where

quite substantial. See S. REP. NO. 106-150, at 1, 1999 WL 965424 (1999). The relevant text of

25 U.S.C. § 81 (“New Section 81”), as amended, states that “[n]o agreement or contract with an

Indian tribe that encumbers Indian lands for a period of 7 or more years shall be valid unless that

                                                  3
agreement or contract bears the approval of the Secretary of the Interior or a designee of the

Secretary.” 25 U.S.C. § 81(b).

       The legislative history surrounding the enactment of New Section 81 illustrates that

Congress was concerned that “many provisions of [Old Section 81] have come to be antiquated

and unnecessary,” H.R. REP. NO. 106-501, at 2 (2000), as reprinted in 2000 U.S.C.C.A.N. 69,

and their interpretation unpredictable, see S. REP. NO. 106-150, at 5, 1999 WL 965424 (1999).

Congress acknowledged that “Indian tribes, their corporate partners, courts, and the [BIA] have

struggled for decades with how to apply [Old] Section 81 in an era that emphasizes tribal self-

determination, autonomy, and reservation economic development.” Id. at 2. To address these

concerns, Congress narrowed the scope of contracts that required the Secretary’s approval under

New Section 81. Id. at 9. Congress, however, expressed no intent regarding the application of

New Section 81 to contracts formed before its enactment.

       On March 28, 2003, the governor of the Pueblo, Everett Chavez, wrote a letter to the BIA

requesting its review of the Agreement in accordance with the terms of the Agreement and the

BIA’s role “[a]s the federal trust agency[.]” AR at 0052. Governor Chavez requested the review

because he strongly believed that the Agreement was “far too lucrative” for the plaintiff. Id. On

October 23, 2003, the acting regional director of the BIA, Ronald Toya, informed Governor

Chavez and the plaintiff that upon review of the Agreement, the BIA concluded that it was never

legally valid. Id. at 0036-0041. Specifically, the BIA determined that (1) the Agreement was

subject to review under Old Section 81 because it was formed before the enactment of New

Section 81; (2) the Agreement required approval by the BIA, as the designee of the Secretary of

the DOI; (3) the retroactive approval of the Agreement would not be in the best interest of the

                                                 4
Pueblo; and (4) because the Agreement was not approved by the BIA, it “has never been legally

valid and any monies received by [the plaintiff] pursuant to [the Agreement] were unauthorized.”

Id. at 0036-0041.

       The plaintiff appealed the BIA’s decision to the Board, which issued its opinion on

March 27, 2007. Id. at 0826. The Board made two determinations on the merits of the appeal.

First, it affirmed the BIA’s “choice of law to review the Agreement under Old Section 81 rather

than under [New Section 81.]” Id. at 0826, 0840-0842. Second, it affirmed in part and abstained

in part regarding the BIA’s determination that Old Section 81 required the BIA’s approval as the

designee of the Secretary of the DOI. Id. at 0826, 0842-0848. In reviewing the merits of the

BIA’s decision that the Agreement was within the scope of contracts that required approval

under Old Section 81, the Board applied the following three-part test: “(1) is the Agreement with

a ‘tribe of Indians,’ (2) is the Agreement for the payment or delivery of any money or other thing

of value in consideration of services for the tribe, and (3) is the Agreement ‘relative to’ Indian

lands?” Id. at 0842. The Board affirmed the BIA’s decision that the Agreement was with an

Indian tribe, concluded that the parties did not dispute the second element, and “abstain[ed] from

making a determination regarding the third element because of collateral judicial proceedings

involving the [DOI].” Id. at 0842.

       On July 20, 2007, the plaintiff sought review of the Board’s decision in this court. The

parties filed cross-motions for summary judgment disputing the legal propriety of the Board’s

order and opinion. The court now turns to the resolution of these issues.

                                                  5
                                         III.   ANALYSIS

                   A.    Legal Standard for Motion for Summary Judgment

       Summary judgment is appropriate when “the pleadings, the discovery and disclosure

materials on file, and any affidavits show that there is no genuine issue as to any material fact

and that the movant is entitled to judgment as a matter of law.” FED. R. CIV. P. 56(c); see also

Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Diamond v. Atwood, 43 F.3d 1538, 1540

(D.C. Cir. 1995). To determine which facts are “material,” a court must look to the substantive

law on which each claim rests. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A

“genuine issue” is one whose resolution could establish an element of a claim or defense and,

therefore, affect the outcome of the action. Celotex, 477 U.S. at 322; Anderson, 477 U.S. at 248.

       In ruling on a motion for summary judgment, the court must draw all justifiable

inferences in the nonmoving party’s favor and accept the nonmoving party’s evidence as true.

Anderson, 477 U.S. at 255. A nonmoving party, however, must establish more than “the mere

existence of a scintilla of evidence” in support of its position. Id. at 252. To prevail on a motion

for summary judgment, the moving party must show that the nonmoving party “fail[ed] to make

a showing sufficient to establish the existence of an element essential to that party’s case, and on

which that party will bear the burden of proof at trial.” Celotex, 477 U.S. at 322. By pointing to

the absence of evidence proffered by the nonmoving party, a moving party may succeed on

summary judgment. Id.

       The nonmoving party may defeat summary judgment through factual representations

made in a sworn affidavit if he “support[s] his allegations . . . with facts in the record,” Greene v.

Dalton, 164 F.3d 671, 675 (D.C. Cir. 1999) (quoting Harding v. Gray, 9 F.3d 150, 154 (D.C.

                                                  6
Cir. 1993)), or provides “direct testimonial evidence,” Arrington v. United States, 473 F.3d 329,

338 (D.C. Cir. 2006). Indeed, for the court to accept anything less “would defeat the central

purpose of the summary judgment device, which is to weed out those cases insufficiently

meritorious to warrant the expense of a jury trial.” Greene, 164 F.3d at 675.

       B.    Legal Standard for Judicial Review of Agency Interpretations of Statutes

        The APA requires a reviewing court to set aside agency action, findings and conclusions

that are “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”

5 U.S.C. § 706(2)(A); Tourus Records, Inc. v. Drug Enforcement Admin., 259 F.3d 731, 736

(D.C. Cir. 2001). The Supreme Court set forth a two-step approach to determine whether an

agency’s interpretation of a statute is valid under the APA. Chevron, U.S.A., Inc. v. Natural Res.

Def. Council, Inc., 467 U.S. 837 (1984). This approach, commonly referred to as “Chevron

deference,” requires the court to first look to “whether Congress has spoken to the precise

question at issue.” Id. at 842. If so, the court ends its inquiry. Id. But, if the statute is

ambiguous or silent, the second step requires the court to defer to the agency’s position, as long

as it is “based on a permissible construction of the statute.” Id. at 843; Sea-Land Serv., Inc. v.

Dep’t of Transp., 137 F.3d 640, 645 (D.C. Cir. 1998) (holding that “[Chevron] deference comes

into play, of course, only as a consequence of statutory ambiguity, and then only if the reviewing

court finds an implicit delegation of authority to the agency”).

        “If it appears, however, that Congress did not actually have an intent regarding the

statutory construction question at issue,” an agency’s construction of the statute will be upheld if

its reading “represents a reasonable accommodation of conflicting policies [Congress]

committed to the agency’s care.” Page v. Pension Benefit Guar. Corp., 968 F.2d 1310, 1313-14

                                                   7
(D.C. Cir. 1992) (internal quotations omitted). In particular, the Supreme Court has long

accorded considerable weight to an executive department’s construction of the statutory scheme

it is entrusted to administer “whenever decision as to the meaning or reach of a statute has

involved reconciling conflicting policies, and a full understanding of the force of the statutory

policy in the given situation has depended upon more than ordinary knowledge respecting the

matters subjected to agency regulations.” United States v. Shimer, 367 U.S. 374, 382 (1961); see

also Shippers Comm., OT-5 v. Interstate Commerce Comm’n, 968 F.2d 75, 81 (D.C. Cir. 1992).

       “The court need not conclude that the agency construction was the only one it

permissibly could have adopted to uphold the construction, or even the reading the court would

have reached if the question initially had arisen in a judicial proceeding.” Chevron, 467 U.S.

at 843 n.11; see also Motor Veh. Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43

(1983) (explaining that “the scope of review under the ‘arbitrary and capricious’ standard is

narrow and a court is not to substitute its judgment for that of the agency”). Instead, all that is

required is that the agency’s construction of the statute be reasonable. Chevron, 467 U.S. at 843-

44. Accordingly, the agency action under review is “entitled to a presumption of regularity.”

Citizens to Pres. Overton Park, Inc. v. Volpe, 401 U.S. 402, 415 (1971), abrogated on other

grounds by Califano v. Sanders, 430 U.S. 99 (1977).

       In making this inquiry, however, the reviewing court “must consider whether the

[agency’s] decision was based on a consideration of the relevant factors and whether there has

been a clear error of judgment.” Marsh v. Or. Natural Res. Council, 490 U.S. 360, 378 (1989)

(internal quotations omitted). At a minimum, the agency must have considered relevant data and

articulated an explanation establishing a “rational connection between the facts found and the

                                                  8
choice made.” Bowen v. Am. Hosp. Ass’n, 476 U.S. 610, 626 (1986); Tourus Records, 259 F.3d

at 736; Pub. Citizen, Inc. v. Fed. Aviation Admin., 988 F.2d 186, 197 (D.C. Cir. 1993) (noting

that “[t]he requirement that agency action not be arbitrary or capricious includes a requirement

that the agency adequately explain its result”). An agency action is arbitrary or capricious if

       the agency has relied on factors which Congress has not intended it to consider,
       entirely failed to consider an important aspect of the problem, offered an explanation
       for its decision that runs counter to evidence before the agency, or is so implausible
       that it could not be ascribed to a difference in view or the product of agency
       expertise.

Motor Veh. Mfrs. Ass’n, 463 U.S. at 43; see also County of L.A. v. Shalala, 192 F.3d 1005, 1021

(D.C. Cir. 1999) (holding that “[w]here the agency has failed to provide a reasoned explanation,

or where the record belies the agency’s conclusion, [the court] must undo its action”). This

requirement is not particularly demanding. Pub. Citizen, 988 F.2d at 197. Nothing more than a

“brief statement” is necessary, as long as the agency explains “why it chose to do what it did.”

Tourus Records, 259 F.3d at 737. If the court can “reasonably discern[]” the agency’s path, it

will uphold the agency’s decision. Pub. Citizen, 988 F.2d at 197 (citing Bowman Transp., Inc. v.

Ark.-Best Freight Sys., Inc., 419 U.S. 281, 286 (1974)).

  C. The Court Grants in Part and Denies in Part the Plaintiff’s Motion for Summary
Judgment, Denies the Defendant’s Motion for Summary Judgment and Remands the Case
            for Further Explanation of the Statutory Construction Claim

       The court grants in part the plaintiff’s motion for summary judgment by remanding the

Board’s decision that the Agreement was invalid. As explained below, this decision was

arbitrary and capricious because the Board failed to address two considerations central to its

holding: (1) whether application of New Section 81 would have an “impermissible retroactive

effect” and (2) whether the Agreement would require the Secretary’s approval under Old

                                                 9
Section 81. Instead, the Board merely assumed, without explanation, the answers to these

dispositive questions.

         1. The Board’s Decision Regarding the Statutory Construction Claim Is
        Not Entitled to Chevron Deference Because It Was Arbitrary and Capricious

       The plaintiff argues that the Board did not consider relevant facts or enter relevant

findings rendering its decision improper under the APA. Pl.’s Mot. at 5. The defendants counter

that the Board “acted reasonably[ and] within [its] discretion.” Def.’s Opp. to Pl’s Mot. at 4-5.

       In its decision, the Board relied on the Supreme Court’s resolution of the “apparent

tension” between the competing rules regarding the retroactive application of statutes. AR at

0840-0842 (basing its opinion on Landgraf v. USI Film Prods., 511 U.S. 244, 278 (1994)). In

Landgraf, the Supreme Court explained that when a case implicates a federal statute enacted

after the events giving rise to the suit, the court must consider its retroactive application through

a three-part test. Landgraf, 511 U.S. at 280. First, the court must “determine whether Congress

has expressly prescribed the statute’s proper reach[,]” which controls its application as

prospective or retroactive. Id. Second, if the statute contains no such express command, the

court must then determine whether the new statute would have an impermissible retroactive

effect. Id. at 269-70, 280. A statute has an impermissible retroactive effect when its retroactive

application “would impair the rights a party possessed when he acted, increase a party’s liability

for past conduct, or impose new duties with respect to transactions already completed.” Id. at

280 (explaining that a statute does not have an impermissible retroactive effect “merely because

it is applied in a case arising from conduct antedating the statute’s enactment”). Third, if the

statute would have an impermissible retroactive effect, the court should apply the traditional

                                                 10
presumption that the new statute “does not govern absent clear congressional intent favoring

such a result.” Id.

       Although the Board acknowledged that whether it is permissible to apply a statute

retroactively depends on the effect such application would have, it merely “assume[d], for

purposes of [its] discussion, that application of the different versions of the statute would yield

different results.” AR at 0840. That is, the Board acknowledged that the application of New

Section 81 would have a retroactive effect, but it ended its inquiry there and did not determine

whether the retroactive effect would be impermissible. The Board should have explained how

the application of New Section 81 would impair the rights, increase the liability, or impose new

duties on a party to support its decision that it would be impermissible to apply the statute

retroactively. See Landgraf, 511 U.S. at 280.

       The court does not conclude that the Board made an incorrect decision regarding the

retroactive effect of New Section 81; rather, the court concludes that the Board’s decision was

incomplete, which violates the prohibition against arbitrary or capricious agency decisions. See

Motor Veh. Mfrs. Ass’n, 463 U.S. at 43 (defining as “arbitrary and capricious” agency decisions

that are incomplete because they fail to consider important aspects of the problem presented to

the agency); North Carolina v. EPA, 531 F.3d 896, 906 (D.C. Cir. 2008). Moreover, the court

cannot compensate for the deficiency in the Board’s analysis by supplying a rationale that the

Board has not articulated. Motor Veh. Mfrs. Ass’n, 463 U.S. at 43; see also Williams Gas

Processing-Gulf Coast Co. v. Fed. Energy Regulatory Comm’n, 475 F.3d 319, 328-29 (D.C. Cir.

2006) (explaining that “[a]rbitrary and capricious review strictly prohibits [a court] from

                                                 11
upholding agency action based only on our best guess as to what reasoning truly motivated it”).

Standing alone, the Board’s assumption cannot satisfy the requirements of the APA.

         2. The Board’s Decision Regarding the Secretarial Approval Claim is
        Not Entitled to Chevron Deference Because it was Arbitrary and Capricious

       Because reviewing courts are to “uphold a decision of less than ideal clarity if the

agency’s path may reasonably be discerned[,]” this court continues its review of the Board’s

decision. Motor Veh. Mfrs. Ass’n, 463 U.S. at 43; see also Point Park Univ. v. Nat’l Labor

Relations Bd., 457 F.3d 42, 49-50 (D.C. Cir. 2006) (stating that the court’s “indulgen[ce] toward

administrative action to the extent of affirming an order where the agency’s path can be

discerned even if the opinion leaves much to be desired”) (internal quotations omitted). This

continued review serves the purpose of examining the Board’s entire decision to see if its

analysis on other issues could provide a basis for its decision to apply Old Section 81.

Accordingly, the court looks to the Board’s ruling that Old Section 81 requires the Secretary’s

approval.

       The parties agree that the Secretary’s approval of the Agreement is not required under

New Section 81. Joint Stipulation ¶ 2. If the Board explained why Old Section 81 required the

Secretary’s approval of the Agreement, the court could consider that explanation as the

reasoning by which the Board supported its prior assumption concerning the retroactive effect of

New Section 81. The Board invites this comparison by stating “that if the Agreement is exempt

from [the Secretary’s] approval under New Section 81, the application of New Section 81 would

significantly change the legal consequences of the [] Agreement by rendering valid an otherwise

invalid contract.” AR at 0841 (emphasis added). The Board’s reasoning on this point, however,

                                                12
is also incomplete because it failed to explain how the application of New Section 81 “would

significantly change the legal consequences of the [] Agreement.” Id.

       In its opinion, the Board considered whether Old Section 81 required the Secretary’s

approval by employing the following three-part test: “(1) is the Agreement with a ‘tribe of

Indians,’ (2) is the Agreement for the payment or delivery of any money or other thing of value

in consideration of services for the tribe, and (3) is the Agreement ‘relative to’ Indian lands?”

Id. at 0842. The Board, however, “abstain[ed] from making a determination regarding the third

element because of collateral judicial proceedings involving the [DOI].” Id. at 0842. The Board

did “not address or express any view on the merits of this issue, and instead dismiss[ed] this

portion of the appeal, [and] allow[ed] the [BIA]’s determination on this particular issue to

become effective.” Id. at 0848.

       The Board’s abstention from addressing whether the Agreement was “relative to Indian

lands” compounds the problem with its assumption regarding New Section 81’s retroactive

effect. Without a clear presentation of the Board’s reasoning, the court cannot perform its

reviewing function or discern the path taken by the Board in deciding that the Agreement is

invalid. See Point Park Univ., 457 F.3d at 50. The court cannot fill in critical gaps in the

Board’s reasoning, but can only look to the Board’s stated rationale. See id. Even if the court

agreed with the Board’s ultimate judgment, “in administrative law, [a court] cannot sustain a

‘right-result, wrong-reason’ decision of an agency.” Sprint Nextel Corp. v. FCC, 508 F.3d 1129,

1132-33 (D.C. Cir. 2007). A reviewing court must have more than a result; it needs the agency’s

reasoning for that result. Id. at 1132. Accordingly, the court must remand this case to the Board

so that it may fully articulate its reasoning. Id. at 1133; see also Point Park Univ., 457 F.3d

                                                 13
at 49 (determining that an agency’s silence was insufficient for the court’s review and remanding

the case to the agency’s internal appellate board “to provide a more fulsome explanation of its

decision”).

                                     IV.    CONCLUSION

       For the foregoing reasons, the court grants in part and denies in part the plaintiff’s motion

for summary judgment and denies the defendant’s motion for summary judgment. The court

remands this case to the Board to explain the basis for its decision in accordance with this

opinion. An Order consistent with this Memorandum Opinion is separately and

contemporaneously issued this 19th day of February 2009.

                                                             RICARDO M. URBINA
                                                            United States District Judge

                                                14