Fletcher v. United States , 854 F.3d 1201 ( 2017 )

FILED
United States Court of Appeals
Tenth Circuit
April 21, 2017
PUBLISH Elisabeth A. Shumaker
Clerk of Court
UNITED STATES COURT OF APPEALS
TENTH CIRCUIT
WILLIAM S. FLETCHER,
individually, and as member of the
Osage Development Council, and on
behalf of themselves and all others No. 16-5050
similarly situated; JUANITA W.
WEST; CORA JEAN JECH; BETTY
WOODY,
Plaintiffs - Appellants,
and
CHARLES A. PRATT, individually,
and as member of the Osage
Development Council,
Plaintiff,
v.
UNITED STATES OF AMERICA;
DEPARTMENT OF INTERIOR;
RYAN ZINKE, in his official capacity
as Secretary of the Interior; * BUREAU
OF INDIAN AFFAIRS; MICHAEL S.
BLACK, in his official capacity as
Acting Assistant Secretary Indian
*
Pursuant to Fed. R. App. P. 43(c)(2), Ryan Zinke, who is the current
Secretary of the Interior, is automatically substituted for Sally Jewell as
Defendant in this case.
Affairs, United States Department of
the Interior, **
Defendants - Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OKLAHOMA
(D.C. No. 4:02-CV-00427-GKF-PJC)
Jason B. Aamodt (Dallas L.D. Strimple of Indian and Environmental Law Group,
PLLC; J. David Jorgenson and Mark A. Waller of Waller, Jorgenson, Warzynski,
PLLC; G. Steven Stidham of Levinson, Smith & Huffman, Tulsa, Oklahoma;
Amanda S. Proctor of Shield Law Group, PLLC, Jenks, Oklahoma, with him on
the brief), Indian and Environmental Law Group, PLLC; Tulsa, Oklahoma, for
Plaintiffs - Appellants.
Anna T. Katselas (Joseph H. Kim and Katherine W. Hazard of U.S. Department of
Justice, Environment and Natural Resources Division; John C. Cruden, Assistant
Attorney General; Kenneth Dalton, Director, Dondrae Maiden, Ericka Howard
and Kristen Kokinos, Attorney-Advisors of Indian Trust Litigation, Office of the
Solicitor, U.S. Department of the Interior, with him on the brief), U.S.
Department of Justice, Environment and Natural Resources Division, Washington,
D.C., for Defendants - Appellees.
Before KELLY, EBEL, and BACHARACH, Circuit Judges.
KELLY, Circuit Judge.
Plaintiffs-Appellants, a certified class of Osage tribal members who own
headrights, appeal from the district court’s accounting order made pursuant to
**
Similarly, Michael S. Black, the current Acting Assistant
Secretary–Indian Affairs, United States Department of the Interior, is substituted
for Larry Roberts as Defendant in this case.
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25 U.S.C. § 4011. Fletcher v. United States, 153 F. Supp. 3d 1354 (N.D. Okla.
2015). Our jurisdiction arises under 28 U.S.C. § 1291, and we affirm.
Background
In 1872, Congress established a reservation for the Osage Tribe in present-
day Osage County, Oklahoma. Just after the turn of the century, rich deposits of
oil, gas, coal, and other minerals were found on the reservation. This discovery
prompted Congress to pass the Osage Allotment Act of 1906 (the Act), which
severed the reservation’s subsurface mineral estate from the surface estate, and
placed the mineral estate in a trust for the Osage Tribe with the government as
trustee. The Act assigned the Secretary of the Interior (Secretary) to distribute
pro rata royalties from the mineral estate to Osage tribal members whose names
were recorded on an official roll. These royalty interests are known as
headrights. At first, Osage tribal members transferred their headrights to people
and entities outside of the Osage tribe, but several subsequent amendments to the
Act prohibited that practice. The Act also requires the government to provide an
accounting for the trust: “The Secretary shall account for the daily and annual
balance of all funds held in trust by the United States for the benefit of an Indian
tribe or an individual Indian which are deposited or invested pursuant to
section 162a of this title.” 25 U.S.C. § 4011(a).
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Plaintiffs brought this action in 2002 1 and filed a third amended complaint
in 2010. In that complaint, Plaintiffs alleged that the government was improperly
distributing royalties to non-Osage tribal members, which diluted the royalties for
the Osage tribal members — the rightful headright owners. The complaint
attributes this misdistribution to the government’s mismanagement of the trust
assets and the government’s failure to perform an accounting pursuant to § 4011.
Thus, Plaintiffs sought to compel the government to perform an accounting and to
prospectively restrict royalty payments to Osage tribal members and their heirs.
The district court dismissed Plaintiffs’ accounting claim because it found
that § 4011 only required the government to account for deposits, not
withdrawals, and that such an accounting would not support Plaintiffs’
misdistribution claim. Fletcher v. United States, No. 02-CV-427-GKF-FHM,
1
William Fletcher and Charles Pratt, Osage tribal members who own
headrights, were the original plaintiffs in this suit before this class was certified.
They alleged in their initial complaint that the government: (1) violated their right
to political association and participation in the Osage Tribe; (2) breached its trust
responsibilities by (a) eliminating their right to participate or vote in Osage tribal
elections, and (b) allowing mineral royalties to be alienated to people and entities
outside of the Osage Tribe; and (3) committed an impermissible taking under the
Fifth Amendment. They appealed from the district court’s dismissal of the
complaint. On appeal, they only contested the dismissal of their taking claim and
their breach of trust claim. Fletcher v. United States (Fletcher I), 160 F. App’x
792, 794 (10th Cir. 2005) (unpublished). Two aspects of Fletcher I are relevant
to this appeal. First, the court found that the government had waived its
sovereign immunity because the original plaintiffs did not seek money damages
but rather an accounting as to proper payment of royalties. Id. at 796–97.
Second, the original plaintiffs explained during oral argument that they were
seeking “an order directing the [government] to comply with the requirements of
the [Act] from the date of the filing of the complaint in this case.” Id. at 797.
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2012 WL 1109090, at *7 (N.D. Okla. Mar. 31, 2012) (unpublished).
We reversed and remanded because an accounting of only the deposits and
not the withdrawals would be incomplete and of little use. Fletcher v. United
States (Fletcher II), 730 F.3d 1206, 1212 (10th Cir. 2013). We also provided
general guidance about the design of any accounting on remand: the accounting
“must give some sense of where money has come from and gone to.” Id. at 1215.
The trial court’s overarching task, we said, is to “balance the often warring (and
admittedly incommensurate) considerations of completeness and transparency, on
the one hand, and speed, practicality, and cost, on the other.” Id. at 1214. We
explained that Plaintiffs are “entitled . . . to some measure of information about
the government’s handling of deposits [and] . . . disbursements.” Id. But the
accounting cannot include “information that only loosely relates to [trust
beneficiaries’] own personal beneficial interests, or to information that is unlikely
(because it is so old, or so de minimis, say) to have a meaningful effect on their
beneficial interests.” Id. at 1215. We further cautioned that the accounting
should not be a “green eye-shade death march through every line of every account
over the last one hundred years.” Id. at 1214.
[E]quity does not require an accounting so punctilious, so expensive,
and so laboriously long in coming that the final volume is released
with great fanfare only after generations of beneficiaries have come
in and gone out, the Bureau of Indian Affairs has been forced to turn
a blind eye to other pressing needs in the Native American
community, the public fisc has been thirstily drained, and only the
lawyers have grown fat.
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Id. at 1215.
With this guidance in mind, the district court ordered that the accounting
(1) “run from the first quarter of 2002 until the last available quarter;” (2) “be
divided and organized either by month or by quarter;” (3) “state the date and
dollar amount of each receipt and distribution;” (4) “briefly identify and describe
the source of each trust receipt (i.e., the name of the payer/lessee and the contract
number for the oil and/or gas lease on which the payment is made);” (5) “state the
name of the individual or organization to whom each trust distribution was
made;” (6) “state the headright interest that each beneficiary possessed at the time
of distribution” for headright distributions; and (7) “state the amount of interest
income generated from the tribal trust account and the date on which such interest
was credited to the account.” Fletcher, 153 F. Supp. 3d at 1372.
Both parties filed Rule 59(e) motions to alter or amend the judgment.
Fletcher v. United States, No. 02-CV-427-GKF-PJC, 2016 WL 927196, at *1
(Mar. 11, 2016) (unpublished). The court granted the government’s motion, in
which the government sought more time to complete the accounting. Id. at *2–3.
The court denied in part and granted in part Plaintiffs’ motion. Id. at *3–4. It
refused to expand the scope of the accounting to include more detail and to start
in 1906 (proposals the district court had already rejected), but granted Plaintiffs’
request to have the accounting deadline run from the entry of the court’s
judgment, rather than from after the appeal. See id.-6-
Discussion
Plaintiffs challenge the district court’s ruling as to the time period and
scope of the accounting. They argue (1) the accounting should go back to 1906
(when the headrights were created) as opposed to 2002 (when the litigation
started); and (2) the government should be required to give a more detailed
accounting. We afford the district court “considerable discretion” in fashioning
an accounting. Fletcher II, 730 F.3d at 1214.
A. The Time Period of the Accounting
The district court did not abuse its discretion when it ordered the
accounting to run from 2002. At various times in this suit, Plaintiffs have
requested three different commencement dates: 2002, 1906, and 1972. Before the
district court 2 and before this court in Fletcher I 3 and Fletcher II, 4 Plaintiffs stated
2
See, e.g., Fletcher, 153 F. Supp. 3d at 1369 (“Originally, [P]laintiffs only
requested an accounting of trust distributions going back to 2002.”); see also
Hearing Transcript at 23–24, Fletcher v. United States, No. 4:02-cv-00427-GKF-
PJC (N.D. Okla. Sept. 10, 2009), ECF No. 231 [hereinafter Sept. 10, 2009
Hearing Transcript].
3
Fletcher I, 160 F. App’x at 797 (“[W]e note that at oral argument, the
plaintiffs’ counsel explained that the plaintiffs sought an order directing the
[government] to comply with the requirements of the [Act] from the date of the
filing of the complaint in this case.”).
4
See, e.g., Transcript of Oral Argument at 35, Fletcher II, 730 F.3d 1206(10th Cir. 2013) (No. 12-5078) [hereinafter Fletcher II Transcript of Oral
Argument] (Plaintiffs’ Counsel: [W]e’d like to see [the accounting go] back to the
filing of the complaint in 2002.”); id. at 16 (Judge: “[D]o you want [the
accounting] to go all the way back to 1906?” Plaintiffs’ Counsel: “No. . . . I’m
not interested in going back to 1906.”).
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that the accounting should span from 2002 to the last available quarter. They now
contend that the accounting should start in 1906, and that their requests that the
accounting run from 2002 were made in the context of the misdistribution claim,
which has since been dismissed without prejudice. But the misdistribution claim
and the accounting claim are intertwined; Plaintiffs maintained in multiple
proceedings that the accounting claim is merely a means to later sue for
misdistribution. 5 Indeed, we noted in Fletcher II that “[P]laintiffs ultimately hope
to prove that the government has sent money to persons ineligible to receive
headright shares . . . and, in this way, improperly diminished their pro rata share.”
730 F.3d at 1215. Even now Plaintiffs state that they will likely bring back their
misdistribution claim after the government performs the accounting. See Aplt.
Reply Br. at 1.
Plaintiffs argue that the government “should be ordered either . . . to
5
See, e.g., Fletcher II Transcript of Oral Argument at 35 (Plaintiffs’
Counsel: “What we’re looking for is . . . whether . . . the United States . . . [is]
making [payments] to the right people.”); Hearing Transcript at 23–24, Fletcher v.
United States, No. 4:02-cv-00427-GKF-PJC (N.D. Okla. Dec. 10, 2010), ECF
No. 1112 (Plaintiffs’ Counsel: “[T]he question that we lay out . . . of whether or
not persons are entitled to receive these monies is not just a simple question of
whether or not any non-Osage can obtain. We concede . . . that many non-Osages
are entitled to receive these funds and . . . we think that they are a part of our
class. The problem that we have in this case is we don’t know which ones they
are and there’s no way to determine that until an accounting is provided.”);
Sept.10, 2009 Hearing Transcript at 22 (Plaintiffs’ Counsel: “Currently . . . data
[about headright transfers] doesn’t exist. . . . I think the thing that gets us that
data is . . . an accounting. And I think . . . that if we could get an accounting .
. . we could really limit these things.”).
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account fully for the period beginning in 1906, or . . . bear the burden to show
that it literally cannot do so.” Aplt. Br. at 25. This proposal directly contradicts
our guidance in Fletcher II: to avoid “[a] green eye-shade death march through
every line of every account over the last one hundred years.” 730 F.3d at 1214
(emphasis added). Plaintiffs acknowledge that the government “does not possess
sufficient records to provide a 109-year accounting,” and have “[n]o doubt” such
an accounting would be expensive. Aplt. Br. at 22. Yet, they request such an
expansive accounting because they argue the government, as a trustee, should not
gain any advantage from its failure to account. Id. at 19. But district courts must
be reasonable, not punitive, when sitting in equity, and requiring the government
to sift through more than 100 years of records does not achieve the balance we
envisioned in Fletcher II. See 730 F.3d at 1214.
Plaintiffs now suggest yet another starting point — 1972 — for the
accounting. By 1972, they explain, the government began storing records on
electronic databases, cf. Aplt. Br. at 22, and presumably Plaintiffs think it would
be just as easy for the government to produce its records from 2002 as it would be
to produce them going back to 1972. But this new date, requested for the first
time at oral argument for this appeal, “comes too late.” Thomas v. Denny’s, Inc.,
111 F.3d 1506, 1510 n.5 (10th Cir. 1997). Moreover, no evidence in the record
supports the contention that the government did indeed start storing its documents
electronically in 1972, or that it would be feasible to produce them. And such
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evidence, even if it existed, would not mean that the district court abused its
considerable discretion in fashioning an accounting; nothing in Fletcher II
requires the government to produce all available electronic records.
Finally, although Plaintiffs correctly point out that federal law does not
establish a temporal requirement for an accounting, this does not make imposing a
2002 starting point an abuse of discretion.
B. The Scope of the Accounting
Plaintiffs next argue that the accounting does not encompass enough
information about the trust’s receipts. Plaintiffs assert that the information the
government must produce will not yield a meaningful accounting; Plaintiffs want
to know what volumes of oil, gas, minerals, etc. were purchased and at what
price. Aplt. Br. at 29. Without that information, Plaintiffs explain, there is no
way to tell whether the government was selling resources at the proper market
rate. According to Plaintiffs, they are entitled to such information because “[i]t is
the kind of information to which auditors are entitled when they audit . . . the
joint accounting records of oil and gas operating companies.” Id. at 27.
As an initial matter, Fletcher II does not require an accounting akin to an
audit of an oil and gas operating company. Rather, an accounting need only
provide “some sense of where money has come from and gone to.” Fletcher, 730
F.3d at 1215. We are bound by Fletcher II, and as we explained, “a duty to
account is a duty to account, not a duty to respond to and disprove any and all
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potential breaches of fiduciary duty a beneficiary might wish to pursue once the
accounting information is in hand.” Id. With this standard in mind, we cannot
say that the district court abused its discretion. The accounting the district court
fashioned will certainly inform Plaintiffs of the trust receipts and disbursements
and to whom those disbursements were made.
Further, the increased expense of obtaining the additional information now
sought seems large when compared to how small Plaintiffs’ potential recovery
will likely be for their misdistribution theory. The district court’s example and
accompanying calculations illustrate this point. Fletcher, 153 F. Supp.3d at 1370
n.16. Every headright yields on average $7975 per quarter, and there are 2229
headrights. Id. The district court reasoned that restoring a single headright to the
Osage tribal members would only increase each headright holder’s royalty
distribution by $3.58 per quarter, or a little less than $15.00 per year. See id.
Thus, even if a more detailed accounting might uncover additional evidence of
misdistribution, the increased expense to do so is not justified. “It would . . . be
‘nuts’ to spend billions to recover millions. A court sitting in equity may avoid
reaching that absurdity.” Cobell v. Salazar, 573 F.3d 808, 810 (D.C. Cir. 2009)
(citation omitted). Furthermore, Plaintiffs are not entitled to information that is
unlikely “to have a meaningful effect on their beneficial interests.” Fletcher II,
730 F.3d at 1215.
AFFIRMED.
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