Cobell v. Kempthorne

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Cobell v. Kempthorne (previously Cobell v. Norton) is a class-action lawsuit brought by Native American representatives against the United States government. The plaintiffs claim that the U.S. government has incorrectly accounted for Indian trust assets, which belong to individual Native Americans (as beneficial owners) but are managed by the Department of the Interior as the fiduciary trustee. The case was filed in the United States District Court for the District of Columbia, and originally also asserted claims for mismanagement of the trust assets -- claims which were subsequently disallowed by the Court, on the basis that such claims could only properly be asserted in the United States Court of Federal Claims.

The case is sometimes reported as the largest class-action lawsuit against the U.S. in history, but the basis for this claim is a matter of dispute. Plaintiffs contend that the number of class members is around 500,000, while defendants maintain it is closer to 250,000. The potential liability of the U.S. government in the case is also disputed: plaintiffs have suggested a figure as high as $176 billion, and defendants have suggested a number in the low millions.

1 Background
2 The case
- 2.1 Lamberth removed
3 Notes
4 External links

[edit] Background

[edit] Early Federal Indian Law

The history of the Indian trust is inseparable from the history of the Federal government's relationship with American Indians, and the policies that emanated as that relationship changed. In many ways, the Indian trust is an outgrowth and artifact of a nineteenth century Federal policy that bears the imprint of subsequent shifts in policy.

The federal government's trust responsibility arises out of statutes, regulation, United States Supreme Court decisions and executive orders that outline the responsibilities of the federal government as trustee, in relation to tribes and individual Indians. Based on federal Indian law, the government has certain obligations, including a fiduciary duty to protect tribal and Indian lands, rights and resources.

During the late 1800's, Congress believed that the best way to foster assimilation of Indians was to introduce among the Indians the customs of "civilized" life and gradually absorb them. Under the General Allotment Act of 1887 (the "Dawes Act"), tribal lands were divided into parcels between 40 and 160 acres. The allotments were small compared to the amount of land that had been held by tribes at the passage of the Act. The remaining lands were declared surplus by the government and opened for non-Indian settlement. Section 5 of the Dawes Act required the United States to "hold the land thus allotted, for the period of twenty-five years, in trust for the sole use and benefit of the Indian to whom such allotment shall have been made…" During the trust period, individual accounts were to be set up for each Indian with a stake in the allotted lands, and the lands would be managed for the benefit of the individual allottees. Indians could not sell, lease, or otherwise burden their allotted lands without government approval. Where the tribes resisted allotment, it could be imposed. After twenty-five years, the allotted lands would become subject to taxation. Many allottees did not understand the tax system or did not have the money to pay the taxes, and their land was lost.

Congress terminated the allotment process by enacting the Wheeler-Howard Act of 1934 (Indian Reorganization Act).

[edit] Criticisms of BIA management

Criticisms of the BIA's management of Indian trust assets ensued from almost the very beginning.

[edit] Fractionation

For nearly one hundred years, the effects and consequences of federal Indian allotments have developed into the problem of fractionation. Over the past 40 years, the number of acres of trust land has grown by approximately 80,000 acres (320 km²) per year. Approximately 357 million dollars is collected annually from all sources of trust asset management, including coal sales, timber harvesting, oil and gas leases and other rights-of-way and lease activity. No single fiduciary institution has ever managed as many trust accounts as the Department of the Interior has managed over the last century.

Over time, the system of allotments established by the General Allotment Act of 1887 has resulted in the fractionation of ownership of Indian land. As original allottees die, their heirs receive equal, undivided interests in the allottees' lands. In successive generations, smaller undivided interests descend to the next generation. Fractionated interests in individual Indian allotted land continue to expand exponentially with each new generation. Today, there are approximately four million owner interests in the 10 million acres (40,000 km²) of individually owned trust lands, a situation the magnitude of which makes management of trust assets extremely difficult and costly. These four million interests could expand to 11 million interests by the year 2030 unless an aggressive approach to fractionation is taken. There are now single pieces of property with ownership interests that are less than 0.0000001% or 1/9 millionth of the whole interest, which has an estimated value of .004 cent.

Interior is involved in the management of 100,000 leases for individual Indians and tribes on trust land that encompasses approximately 56 million acres (230,000 km²). Leasing, use permits, sale revenues, and interest of approximately $226 million per year are collected for approximately 230,000 individual Indian money (IIM) accounts, and about $530 million per year are collected for approximately 1,400 tribal accounts. In addition, the trust currently manages approximately $2.8 billion in tribal funds and $400 million in individual Indian funds.

Under current regulations, probates need to be conducted for every account with trust assets, even those with balances between one cent and one dollar. While the average cost for a probate process exceeds $3,000, even a streamlined, expedited process costing as little as $500 would require almost $10,000,000 to probate the $5,700 in these accounts.

Unlike most private trusts, the Federal Government bears the entire cost of administering the Indian trust. As a result, the usual incentives found in the commercial sector for reducing the number of small or inactive accounts do not apply to the Indian trust. Similarly, the United States has not adopted many of the tools that States and local government entities have for ensuring that unclaimed or abandoned property is returned to productive use within the local community.

The critical need to address fractionation is not a new issue. In the 1920s the Brookings Institution conducted the first major investigation of the impacts of fractionation. This report, which became known as the Merriam Report, was issued in 1928 and formed the basis for land reform provisions that were included in what would become the Indian Reorganization Act of 1934 (IRA). The original versions of the IRA included two key titles; one dealing with probate and the other with land consolidation. Because of opposition to many of these provisions in Indian Country, most of these provisions were removed and only a few basic land reform and probate measures were included in the final bill. Thus, although the IRA made major reforms in the structure of tribes and stopped the allotment process, it did not meaningfully address fractionation.

In 1922, the General Accounting Office (GAO) conducted an audit of 12 reservations to determine the severity of fractionation on those reservations. The GAO found that on the 12 reservations upon which it compiled data, there were approximately 80,000 discrete owners but, because of fractionation, there were over a million ownership records associated with those owners. The GAO also found that if the land was physically divided by the fractional interests, many of these interests would represent less than one square foot of ground. In early 2002, the Department of the Interior attempted to replicate the audit methodology used by GAO and to update the GAO report data to assess the continued growth of fractionation and found that it grew by over 40% between 1992 and 2002.

As an example of continuing fractionation, consider a real tract identified in 1987 in Hodel v. Irving, 481 U.S. 704 (1987):

Tract 1305 is 40 acres and produces $1,080 in income annually. It is valued at $8,000. It has 439 owners, one-third of whom receive less than $.05 in annual rent and two-thirds of whom receive less than $1. The largest interest holder receives $82.85 annually. The common denominator used to compute fractional interests in the property is 3,394,923,840,000. The smallest heir receives $.01 every 177 years. If the tract were sold (assuming the 439 owners could agree) for its estimated $8,000 value, he would be entitled to $.000418. The administrative costs of handling this tract are estimated by the BIA at $17,560 annually.

Today, this tract produces $2,000 in income annually and is valued at $22,000. It now has 505 owners but the common denominator used to compute fractional interests has grown to 220,670,049,600,000. If the tract were sold (assuming the 505 owners could agree) for its estimated $22,000 value, the smallest heir would now be entitled to $.00001824. The administrative costs of handling this tract in 2003 are estimated by the BIA at $42,800.

Fractionation continues to become significantly worse and, as pointed out above, in some cases the land is so highly fractionated that it can never be made productive because the ownership interests are so small it is nearly impossible to obtain the level of consent necessary to lease the land. In addition, to manage highly fractionated parcels of land, the government spends more money probating estates, maintaining title records, leasing the land, and attempting to manage and distribute tiny amounts of income to individual owners than is received in income from the land. In many cases the costs associated with managing these lands can be significantly more than the value of the underlying asset.

[edit] The case

Cobell v. Babbitt was filed on June 10, 1996. The named plaintiffs are Elouise Cobell, Earl Old Person, Mildred Cleghorn, Thomas Maulson and James Louis Larose. The defendants are the United States Department of the Interior and the United States Department of the Treasury. According to Cobell, "the case has revealed mismanagement, ineptness, dishonesty, and delay of federal officials." Cobell is represented by the Native American Rights Fund and the firm of Kilpatrick Stockton. The Department of the Interior was represented first by Bruce Babbitt, then Gale Norton, and currently Dirk Kempthorne (as of May 2006). The case was assigned to Judge Royce Lamberth, who eventually became a harsh critic of Interior in a series of sharply worded opinions.

Due to a court order (at the request of the plaintiffs) in the litigation, portions of Interior's website, including the Bureau of Indian Affairs (BIA), have been shut down since December 2001^[1]. BIA and other Interior bureaus and offices remain disconnected from the Internet.

[edit] Lamberth removed

On July 11, 2006, the U.S. Court of Appeals for the District of Columbia Circuit, siding with the government, removed Judge Lamberth from the case -- finding that Lamberth had lost his objectivity. "We conclude, reluctantly, that this is one of those rare cases in which reassignment is necessary," the judges wrote.

Lamberth, a Ronald Reagan appointee known for speaking his mind, repeatedly sided with the Native Americans in their class-action lawsuit. His opinions condemned the government and found Interior Secretaries Gale Norton and Bruce Babbitt in contempt of court for their handling of the case. The appellate court reversed Lamberth several times, including the contempt charge against Norton. After a particularly harsh opinion last year, in which Lamberth lambasted the Interior Department as racist, the government petitioned to remove Lamberth, saying he was too biased to continue with the case.

The Appeals Court concluded that some of Judge Lamberth's statements went too far, and "on several occasions the district court or its appointees exceeded the role of impartial arbiter." The Court wrote that Lamberth believed that racism at Interior continued and is "a dinosaur -- the morally and culturally oblivious hand-me-down of a disgracefully racist and imperialist government that should have been buried a century ago, the last pathetic outpost of the indifference and anglocentrism we thought we had left behind."

The Appeals Court ordered the case reassigned to another judge.