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Supreme Court Vindicates Tribal Contract Rights

On June 18 the Supreme Court issued a rare decision favoring Indian Tribes in a one billion dollar case pitting the Tribes against the Bureau of Indian Affairs and the U.S. Indian Health Service. The epic battle had been brewing for over 20 years and asked whether federal contracts with Tribes awarded under the Indian Self-Determination Act are really contracts at all. The government argued that it could pay whatever it wants, whenever it wants, even after the Tribes had fully performed their end of the bargain. Over the years, ten of twelve federal judges who considered the matter had excused the government from liability, so the outcome in the Supreme Court was far from certain. But if the Supreme Court had adopted the view of those lower court judges, it would have meant that tribal contracts are not contracts at all -- a result that would have destroyed the foundation of the Indian Self-Determination Act on which Tribes operate one-half of all BIA and IHS operations, and it would have relegated Indian Tribes to second-class contractors.

That was a bridge too far, and the Supreme Court was unwilling to cross it. In an unusual alignment bringing together the Court’s most liberal and conservative members -- Justices Scalia Thomas, Sotomayor and Kagan -- plus Justice Kennedy, the Court resolved the case in the Tribes’ favor based strictly on ordinary government contract law principles. The result is precisely what Congress intended.

In fact, the Indian Self-Determination Act was purposely rewritten in 1988 to compel the government to award true, binding contracts to the Tribes. The agencies were told to calculate the full amount due under each contract, to pay each tribal contractor that amount, and to request supplemental appropriations from Congress if agency funds ran out. After all, that’s what the government does with every other government contractor, and then-Chairman Daniel Inouye declared that the new amendments would put an end to the past discriminatory treatment suffered by tribal contractors.

Despite the 1988 amendments, the agencies persisted in requesting too few funds to pay all the contracts they signed. Worse yet, they held back from the Tribes how much the Tribes would actually be paid until the contract year was over and the contracts had been fully performed. But the tribal contractors fought back in court, using the new remedies Congress authorized in 1988. In 2005 the Supreme Court ruled for the tribes on an important threshold issue in the “Cherokee” case against the Indian Health Service. Then last year in the “Ramah” class action case against the BIA, the Tenth Circuit Court of Appeals in Denver applied that ruling and agreed that all Tribes were entitled to be paid in full, just like any other government contractor. But by then another appellate court in Washington, D.C had already ruled in the “Arctic” case that the government could not be held responsible for any underpayments, even though the agency had deliberately refused to ask Congress for sufficient funds to pay the contracts in the first place.

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In June the Supreme Court by a 5 to 4 vote upheld the “Ramah” case, reversed the “Arctic” case, and affirmed once again that tribal contractors enjoy all of the same protections that are afforded to other government contractors. No longer can the BIA and IHS simply declare what they will pay the contractors, much less change that amount from one day to the next. In a payment system that has historically worked only to the disadvantage of tribal contractors, the risk of a funding shortfall is now squarely on the government. Tribes that perform their contracts by running federal clinics, schools and police departments will be entitled to be paid in full for their work.

It is not just Indian Tribes that welcomed the Court’s decision. Even the Boeings and General Electrics of the world were watching. In a rare alliance with Tribes, the U.S. Chamber of Commerce and the National Defense Industrial Association stepped in to the case and urged the Court to uphold the right of all government contractors to be paid in full for services duly rendered. The Court agreed, and the result is a victory for tribal contractors and for the policy of Indian Self-Determination.

The next step is for all Tribes to promptly submit claims to the BIA and IHS. Many have done so, but most have not. And while the process is easy, don’t expect the government to help; the litigation only proved that Tribes must fight their own battles if they are to prevail in the courts.

Lloyd Miller is a tribal rights attorney with the Sonosky Chambers firm. He led the Cherokee and Arctic cases and is on the legal team handling the Ramah case.