TRANSCRIPT OF PROCEEDINGS IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT a . ELOUISE PEPION COBELL. ET AL. Plaintiffs-Appellees, No. 003-5262. et al. GALE A. NORTON, SECRETARY OF THE TNTERIOR,ETAL., Defendants-Appellants *uuau**a*aa**uuppaal*au...a.......pu..a....... Pages 1 through 60 Wasbrngton, D C Date September 14, 2004 1 UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT 2 3 4 ELOUISE PEPION COBELL, ET AL., 6 Piaintiffs-Appellees, v. No. 03-5262, at al. 7 GALE A. NORTON, SECRETARY OF THE 8 INTERIOR, ETAL., Defendants-Appellants. 10 ---------------------------------------------- 11 Tuesday, September 14, 2004 12 Washington, D.C. The above-entitled matter oame on for oral argument pursuant to notioe. RE FORE: 15 CHIEF JUDOE CINSBURG AND CIRCUIT JUDGES RANDOLPH 16 AND ROGERS 17 APPEARANCES: !T mt'TT5T F' '!!7 mTTTT' !V!r!t'r T - ! £ 19 MARK STERN, ESQ. 20 ON BEHALF OF THE APPELLEES: 21 G. WILLIAM AUSTIN, ESQ. 22 23 Deposition Services, Inc. 6245 Executive Boulcvanl Reckvjlle! MD 20852 Tel: (301) 881.3344 Fax: (301) 8813338 z 0 ) CLS 2 CONTENTS ORAL ARGUMENT OF: pAGE Mark Stern, Esq. On Behalf of the Appellants S G. William Austin, Esq. On Behalf of the Appellees 21 Mark Stern, Esq. On Behalf of the Appellants -- Rebuttal SO CLS I PROCEEDINGS 2 THE CLERK: Case number 03-5262, et a1., Elouise 3 Pepion Cobell, et al., versus Gale A. Norton as the 4 Secretary of the Interior, et al., appellants; Alan Lee 5 Balaran. Mr. Stern for the appellants, Hr. Austin for the 6 appellees. 8 ORAL ARGUMENT OF MARK STERN, ESQ. 9 ON BEHALF OF THE APPELLANTS 10 11 MR. STERN: May it please the Court. The 12 injunctions on appeal bar the Department of the Interior 13 with some exceptions from having any connection of any kind 14 to the Internet. It's difficult to conceive of what iegai 15 claim or what factual showing might support an order of 16 this kind, which in the year 2004 is approximately has the 17 same effect as telling a cabinet agency that it cannot use 18 the telephone. What is absolute -- 19 JUDGE RANDOLPH: You can't revise the records on 20 a telephone, though. 21 MR. STERN: Excuse me, Your Honor? 22 JUDGE RANDOLPH: You can't revise records on a 23 telephone. J 24 MR. STERN: No. Well, Your Honor, you also 25 can't, I mean, if the question is, the question is what is CLS 4 1 the, I mean, there are a whole layer, number of things, and 2 one of them what the, what harm plaintiffs have 3 demonstrated in this case, what its connection would be to 4 the claim that's actually at issue in this case. But on 5 the other side of the balance is what authority does a 6 District Court have to order a cabinet agency to dismantle 7 a communication system, so that normally if we identified 8 exactly what the particular iegal duty was and what the 9 standard was by which at was measured, and plaintiffs had 10 prevailed on that, there would still be the question of 11 appropriate relief. 12 JTJDGE RA!NDGLPH: No, my only point is, I 13 understand mba communications analogy was that to the 14 extent that there's any finding here that it was on the 15 basis that you could hack into the system and change the 16 records, right? 17 MR. STERN: That's right, Judge Randolph. 18 JUDGE R!JDCLPH: Right, and you can't do that by 19 a telephone. p 20 MR. STERN: No, my point was not, was simply to, 21 you know, analogize the level of the harm, because the 22 District Court refers to being disconnected from the 23 Internet as an inconvenience, but sort of, but the point is 24 that in the year 2004, it's, to talk about being 25 disconnected from the Internet as an inconvenience is CLS 5 r approximately the same thing as saying that it's an 2 inconvenience to not be allowed to pick up your telephone, 3 and that's the only point I was trying to make on that 1 4 score. 5 There are at least fundamental errors reflected in the 6 Court's ruling which really sort of go to some of the 7 points that we're already starting to get into, and the 8 first is that there is a, that even though there's some 9 stated connection to the general notion of preserving 10 documents for use in the acco-unting, which is the sort of 11 claim that originally gave rise to this lawsuit, there's at 12 no point been any attempt to define with any clarity 13 precisely what ihat relation is, what the particular legal 14 duty, what the standard would be by which it would be, by 15 which it would measure whether that duty was being 16 fulfilled. And if you look to the -- 17 JUDGE ECGERS: Could I just ask, though, I mean, 18 the Department entered into a consent agreement. 19 MR. STERN: Yes, that's correct, right. 0 20 JUDGE RCGERS: And a lot of your arguments are 21 attacking that, but the Department consented to it, and so 22 to the extent it was deficient, I just wonder how the 23 Department can attack it now. And my second point is your ) 24 brief says that the only enforceable legal obligations at 25 issue arise under the 1994 act, yet hasn't this Court OLE 6 1 rejected that view? 2 MR. STERN: I'll deal with both questions. As to 3 the first one, no, we're not attacking the consent decree. 4 The consent decree is history. S JUDGE ROGERS: I know. But your brief says, 6 well, there was no timetable, there were no standards, and 7 all that. But, I mean -- S MR. STERN: Your honor, the question is now, 9 we-- 10 JUDGE ROGERS: So that part of your brief we 11 don't need to pay attention to? 12 MR. STERN: I'd like to think that we probably 13 put it there for a reason, Judge Rogers. 14 JUDGE ROGERS: Well, I just wanted to understand 13 what the Department's position was on that. 16 MR. STERN: Nell, we were trying to, well, I 17 mean, what happened, to go back to the year 2001, is that, 18 understand, even then, at no point from 2001, 2003, 2004, 19 there's never been a single witness who's taken a stand in C 20 a courtroom to testify about any harm or any problem. 21 Nothing has ever been tested in a court evidentiary 22 proceeding with witnesses, What happened in 2001 was that 23 the special master came into court saying my contractors, 24 who parenthetically had already, were already familiar with 23 the Interior system architecture, because they had been OLE 7 1 working with Interior, have hacked in, and on the basis of 2 that, the District Court issues a temporary restraining 3 order that says, you know, get off the Internet. And 4 interior, you know, maybe not wisely, but it did sort of 5 to, in order to try and reconnect as quickly as possible entered into a consent decree. Now, that consent decree 7 itself had a provision in it for seeking judicial relief, 8 hut what Interior tried to do was to work with the special 9 master, which it tried to do for two years. 10 JUDGE ROGERS: Now, I'm not questioning the 11 Department, but I just needed to understand how we view it 12 now, because the District Court says, fine, the consent 13 decree, it worked well for a while, and now the District 14 Court says I find there is an impasse. 15 MR. STERN: And there was an impasse, and the 16 District Court therefore terminated the consent order 17 regime and said now you're in front of me. So the question 18 is now I'm going to, anything that happens is now going to a 19 be governed by my preliminary injunctions. So the consent 20 order is out of the picture. What's keeping Interior off 21 the Internet right now, and there are systems that are 22 still off the Internet, Kindisoernible) stayed part of the 23 District Court's order, we did not ask for at that time a 24 full stay, because we were trying to focus on the new 25 emergent conditions. What's keeping the Department off the CLS 8 1 Internet and would put it off the Internet altogether are 2 the two preliminary injunctions. So the question then 3 becomes under whet factual showing, you know, I mean, first 4 of all, what the legal claim would be. G!d Your Honor, 5 that gets to your seoond point. 6 JUDGE ROGERS: All right, now, and that's my 7 second question, yes. 8 MR. STERN: And the point there, Your Honor, is 9 this Court certainly said in 2001, it looked to the nature 10 and to understand what the duties were before it. It 11 rejected the Government's claim that there had been no 12 unreasonable delay, because it said, look, whether or not 13 you had a enforceable duty before, there certainly are 14 these background duties, so I'm not going to set the clock 15 running in considering how unreasonable you are. I'm not 16 going to set the clock running just from 1994, though it 17 also said even if I did set the clock running from 1994, 18 you'd still lose. Now, what the Court didn't say was that 19 (a) the background trust principles operated as separate 0 20 legally enforceable items. In fact, what the Court said 21 was, look, to get, to compel an agency action unreasonably 22 delayed, you've got to have a clear, specific statutory 23 mandate, and the Supreme Court in the Southern Utah case 24 from last term made clear that that was absolutely correct. 25 So the question that we have, and what this Court did was CLS 9 1 it approved a remand to the agency to conduct an 2 accounting. 3 So then the question comes in, okay, now, where, you 4 know, how does this come into it? And the only possible 5 connection that could be posited would be that the, that 6 some way the judicial review could expand to take into 7 account a, something that was so overwhelmingly threatening 8 to the existence of an accounting that the Court could in 9 tact insert itself into the ongoing process to issue an 10 order. 11 JUDGE ROGERS: Nell, let me ask you, we said in 12 t3at case that we said, you know, the plaintiffs had shown 13 that there was unreasonable delay in getting an accurate 14 accounting. And then we said that adequate computer 15 systems were vital to the completion of the accounting. 16 ThatTs what this Court said. 17 MR. STERN: Nell, this Court said that, but it 18 also, when it was at pains to say that the District Court 19 had made a mistake in thinking the provision of adequate, 20 the District Court had said, look, there are a number of 21 separate breaches ot your duties, and this Court said I 22 don!t understand how you're going to do the accounting 23 unless you have adequate computer systems and so forth. 24 However, you amend your order to reflect the fact that the 25 duty to perform the accounting is the actionable duty at OLS 10 I issue in this case. Mow, the District Court never amended 2 its order, and that was not mereiy a formalistic mistake, 3 because as subsequent events, you know, demonstrated. But 4 the point is even when the Court was talking about computer S systems at that point, what it was talking about was, you 6 know, do you have good, you know, how good are your 7 computers? How good are you, you know, where are you in 8 terms of your abil.ity to put out account statements? So in 9 that sense, the evidence of, gee, your computer systems 10 don't seem like rioht where they need to be in order to 11 start spitting out those account statements tomorrow was 12 evidenoe that, yeah, there, you know, was unreasonable 13 delay, and thatts what this Court said. 14 The issue of hacking into a computer was not a part of 15 that proceeding. It's a very different kind of issue 16 altogether. So when the District Court says plaintiffs 17 have demonstrated a probability of success on the merits in 1 18 this P.1. because they obtained a declaratory judgment in 19 1999, there's a -- I'm starting to use the word disconnect, C 20 but that's the wrong word to use in these circumstances -- 21 that there is no adequate link between those two things. 22 And one of the reasons that the Court doesn't ever 23 address what the real merits are is it's not clear. We 24 don't know what the duty is. We don't know what plaintiffs 25 would have to do to prevail on this. And it also in the OhS 11 1 District Court's view, it doesn't matter, because there are 2 never going to be further proceedings on the merits. The 3 District Court has said you are totally off the Internet, 4 period, and the Court's order sets out an elaborate scheme 5 tor reconnection when the Court is satisfied that you can 6 come back on. Now, that may be, whatever that's showing 7 is, that's not the merits. We need to know what is that 8 claim, what were the standards that were being used? 1 9 mean, if somebody hacks into Citibank, you know, neople, 10 all computer systems, you know, can be hacked into. There 11 are always vulnerabilities. You know, if somebody hacks 12 into Citibank, that doesn't perforce demonstrate that a 13 judge could shut down Citibank's communication systems 14 because there are, you know, beneficiaries, you know, in 15 trust accounts at Citibank. It wouldn't demonstrate 16 anything on its own. It certainly wouldn't demonstrate 17 that data essential to performing an accounting are being 18 compromised in some way that would be, that the CD 19 Kindisoernible) has been compromised at all or much less 20 that it would be an irretrievable problem. 21 And of course what the District Court's current 22 injunctions totally ignore is the fact that certainly it is 23 the case that back in 2001 Interior's security system was 24 not as good as Interior thought that it should be. We're 25 not trying to say what a great security system we had in CLS 12 1 2001, only that there was no sort of evidence, you know, 2 that would support any kind of an injunction. However, 3 since 2001, the Government has invested huge resources. 4 It's been detailed in the various quarterly reports. It's, 5 you know, put up, you know, sort of, you know, 6 extraordinary focus on perimeter protection and firewalls, 7 you know, to, with a huge emphasis and focus on the hacking 8 problem. And then what plaintiffs bring to the Court's 9 attention are various reports from Government agencies, 10 from various sort of, from 0MB, you know, or whatever, sort 11 of give scorecards. And the 16th Quarterly Report 12 addresses those, that sort of apples-and-oranges 13 comparison, because largely because of the District Court's 14 order with its focus on perimeter seouriru, that's where 15 Interior has invested its time, energy, money. 16 Now, what those other reports go to are a series of 17 sort of management, you know, objectives, you know, 18 including, you know, how, you know, what sort of degrees 19 various people, you know, should, you know, have! you know, 20 what the temperature should be, you know, in particular 21 rooms. I mean, there's a whole realm of things to fall, 22 you know, that are being appraised in those reports. But 23 none of them, oh, which are all on a very general level, ! 24 none of which has anything to do with, you know, the 25 security of the data here. It's never mentioned. And the CLS 13: 1 point about it is that where Interior's put its money in 2 response to this is in protecting this data. 3 Now, none of that, you know, so we're looking at a 4 changed world from the time in 2001, when the special 5 master came in, but even in 2001, there wasn't a single 6 witness to testify about anything, and the only person who 7 is ever known to have hacked into the computer is the 8 special master using his experts. That is it. 9 JUDGE ROGERS: All right. Now, let me ask you 10 about the certifications. Let's step over the issue about 11 statutory aod rule violations. Your position in part, as I 12 understand it, is that there's oo evidentiary basis for the 13 injunction and that the District Court never considered the 14 merits in part of the Government's position that the 15 Department has indeed changed the world in its computer 16 systems since 2001. The Court did oote, however, that the 17 certifications, even considering them, showed internal 18 inconsistencies. And your brief refers to one. z 19 MR. STERN: The District Court's order, to my C 20 recollection, only -- I mean, I could be wrong about this, 21 Your Honor. My recollection was the District Court's order 22 only referred to one, and that was a statement, and that 23 was a discrepancy between a table and a statement in a 24 report, the table did not indicate that a particular, you 25 know, computer, you know, was linked up. You know, that CR5 14 1 information was outdated. The oorrect information was in 2 the report. You know, this is not, 1 mean, I invite the 3 Court, you know, to read this. This is 900 pages of 1 4 pretty, you know, speoifio stuff. 5 JUDGE ROGERS: Right. So as you read the reoord, 6 the District Court is referring only to one inconsistency, 7 and that's the inoonsistenoy you referred to in your brief? B MR. STERN: I, I mean, I stand oorrected, but -- 9 JUDGE ROGERS: No, I know, I'm not trying to -- 10 MR. STERN: But no, but there's certainly no 11 elaborate discussion of, you know, inconsistencies. 12 JUDGE ROGERS: Well, I agree not elaborate, but 13 I, okay. 14 MR. STERN: ?xid, you know, and, you know, the 15 point is the District Court says is I don't care about 16 this, you know. Dud how can you not care about it? And 17 what the District Court also specifically says in 2003 in 19 issuing his injunction, he says plaintiffs have not 19 demonstrated that these systems that were already back C 20 online are insecure. Well, at least as to those, that 21 should have been the end of the story. I mean, plaintiffs 22 have the burden here of demonstrating something. You know, 23 and they had net -- 24 JUDGE ROGERS: Well, let me ask you, I mean, you 25 know better than I that evidence doesn't have to only be 055 15 1 testimonial. Now, we have the reports that point to this 2 ability to hack into, and so the District Court says I need 3 some certification, since time has passed since these were 4 hooked up from the Department. Your position, as I 5 understand it, is, I mean, no authority, period. But if we 6 get over that, no evidentiary basis whatsoever. !d if we 7 get over that, I need to know what your position is. 8 NR. STERN: I'm trying to think what's left. 9 The, I mean, to be clear, the -- 10 JUDGE ROGERS: Well, I thought in part the 11 argument was that the Court had not engaged in a proper 12 hal: ancing of the interests. 13 MR. STERN: Oh, yes, I'm sorry, Your Honor, yes, 14 no, I mean, look, in the end, it, you still couldn't, I 15 mean, let's assume that there really was, you know, that we 16 knew exactly what the duty was, what its relevance was, you 17 know, to, you know, this case, that the link between the 18 accounting had been established, that we really had a 19 security sort of like that there was a relevant security 20 standard that was being, you know, that somebody, you know, 21 was talking about, because all the security standards 22 always, and there's always some level of risk, and they 23 always involve judgments about relative investment. Where 24 do you put your money? How safe do things need to be in 25 order to ward off what kind of risk? It's very hard to CLS 16 1 know how a court could get into that business at all. But 2 even assuming that it did, it's unclear how the result 3 could be to tell the Department of the Interior to get off 4 the Internet. I mean, no private trustee would be told get 5 off the Internet. No private trustee would be told spend 6 hundreds of millions of dollars out of the trust corpus, 7 which is what private trustees would have to spend the 8 money from in order to deal, you know, with a problem that 9 as far as we know hasn't actually caused anybody in the 10 class any harm. However, does the injunction cause you 11 harm? Absolutely. I mean, if you have the full 12 disconnection that the Court's orders require, I mean, when 13 that actually started happening, class members like were up 14 in arms, because it delays getting payments. This is, you 15 know, it's the whole world starts grinding to a halt, and 16 even as to the offices that have remained offline, that's 17 only to the detriment. To deal with a chimerical problem, 18 the agencies that are most involved with an accounting, 19 like the Office of Historical Trust accounting, can't be on 20 the Internet. 21 You know, the, it's, you know, no one is being, you 22 know, helped by this, you know, and there's no authority to 23 do it, so if you, you know, if you filled in a million 24 different connections that are all missing in this case, 25 the bottom line would still be you would never issue a CLS 17 1 2 4 5 6 9 10 -1-i 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ruling of this kind. But all of the connections are missing. JUDGE ROGERS: Your suggestion is the District Court should have asked for reports from the Department as to the status of its dmprovements in its security. MR. STERN: Oh, the Department has regularly reported to the District Court. JUDGE ROGERS: That's the limit of the Court's authority, you suggest. MR. STERN: And, I mean, again, we could -- JUDGE GINSBURG: I'm not sure why you would acknowledge that. JUDGE ROGERS: Well, but he did in his brief, so I just wanted to understand it, yes. MR. STERN: Well, I rican, the point is we have been reporting, you know, we've been reporting to the Court on a whole number of things. The, you know, and what the Court is really not in the business of doing, you know, is sort of dealing with the day-to-day mechanisms of how you go about performing an accounting. And -- JUDGE GINSBURG: Well, if you're right about that, I mean, I take that to mean from your brief that the Court has no legitimate concern with IT security, right? MR. STERN: Certainly on the basis ot what we have here, yes. C z C CbS 18 1 JUDGE GINSBURG: So then presumably you would 2 object also to reporting on where you are in this field. 3 MR. STERN: Your Honor, I mean, there's been a 4 reporting requirement, you know, that was in place. The 5 Department undertook -! 6 JUDGE GINSBURG: Well, maybe in the interest of 7 moving things along, you wouldn't object, but you would 8 certainly say as a matter of law that there's no authority. 9 MR. STERN: No, that's right. I mean, and it 10 really did form no part whatsoever of that original 11 declaratory, you know, judgment. I mean, you know, 12 Internet security as opposed to what are you doing to get 13 the computers in shape so that, you know, there's not going 14 to be an unreasonable delay in issuing account statements. 15 Those really are two very different things. 16 JUDGE RANDOLPH: We're dealing with preliminary 17 injunctions, and one of the, I'm trying to fit this into 18 the traditional mold, which is probability of success on C z 19 the merits. What are the merits? 20 MR. STERN: Your Honor, it goes back to what I 21 was trying to indicate before is we don't know what the 22 merits are, and there is never going to be a proceeding on 23 the merits. I mean, I think the answer that plaintiffs 24 would presumably say is that the merits will be the 25 determination that something is secure, but we don't know CLS 19 1 what, since there's no relevant standard, we don't know, 2 other than statements that the District Court has made that 3 there is a duty to preserve, that you need to preserve 4 records to have an accounting, that is it. There's no S connection that's ever been specified between what you 6 would need to prove to justify an Internet disconnection 7 and that general statement. And we'd submit that there are 8 about 500 like missing links between like having, affecting 9 an accounting and, you know, possible problems in Internet 10 hacking. And that's it. And the only thing that the Court 11 has said about substantial success on the merits is you've 12 got a declaratory judgment and then you've also got a 13 structural injunction. You know, that's it. That's what 14 the District Court says about it. IS JUDGE RANDOLPH: You, the parties, the District 16 Court, everyone uses the term "historical accounting." 17 That phrase, that term is not contained in the '94 act. 18 MR. STERN: No, it's not. 19 JUDGE RANDOLPH: Does the '94 act require a 20 well, tell me what your definition of a historical 21 accounting is? 22 MR. STERN: Well, I think that the term flows 23 from, in part from this Court's 2001 decision, in which the J 24 Court told, you know, Interior that you needed to have a 25 retrospective component to your accounting. So the 1994 CLS 20 1 act speaks in terms of, the accounting provision talks 2 about providing daily and annual balances. And then this 3 Court in 2001 said, well, but you've got to provide an 4 accounting, you know, for funds, you know, deposited 5 previously. So the -- 6 JUDGE RANDOLPH: Well, how far back, you know? 7 MR. STERN: Well, Your Honor, that's a subject 8 of, you know, considerable controversy. You know, this 9 court, you know, talked in terms of aocounting for funds 10 deposited pursuant to the Act of 1938. The District Court 11 has said that the Government should account for all funds, 12 for everything going back to basically the beginning of 13 time. The 14 JUDCE RANDOLPH: Are all those records, say, take 15 1938. Are 1938 records contained now on the computer 16 system? 17 MR. STERN: Interior's in the process of moving 18 those on, because what it is is basically going back to 19 1985, we're sort of in the computer era. Pre-1985 you're 20 looking at the paper records. And so one thing that you 21 have to do, you know, the further you go back, the more 22 sort of time-consuming, you know, and expensive the 23 enterprise becomes, because you've got to physically locate 24 the paper records and then put them on the computer in 25 order to be able to do that accounting. CLS 21 I JUDGE RANDOLPH: On a going-forward basis, the 2 recording of royalty pa\Trients due next week, is there a 3 contention that currently Interior is not recording 4 correctly? 5 MR. STERN: Your Honor, I'm not aware of one, but 6 there are so many contentions in this lawsuit that 1 7 wouldn't presume to say. I mean, it's certainly not the 8 basis of the complaint. There's no showing that that's the 9 case. I mean, there's no showing, you know, about anything 10 in this case. I mean, the last 11 JUDGE RANDOLPH: Well, isn't that part, that's 12 part of tomorrow's case, isn't it, not today's? 13 MR. STERN: Your Honor, I'm trying to 14 (indiscernible) 15 JUDGE GINSBURG: All right. Further questions? 16 Thank you, Mr. Stern. 17 MR. STERN: Thank you. 18 JUDGE GINSBURG: You used your time, but we will 19 give you some time for rehuttel. Mr. Austin? C 20 21 ORAL ARGUMENT OF G. WILLIRM AUSTIN, III, ESQ. 22 ON BEHALF OF THE APPELLEES 23 24 MR. AUSTIN: Good morning. May it please the 25 Gourt. My name is Biil Austin,. and I'm here representing CLS 22 I the Cobell case plaintiffs, 5,000 beneficiaries of the 2 Individual Indian Trust. 3 1 want to begin by acknowledging something to the 4 court. I find it disquieting that able counsel for the 5 Government professes not to know where the obligation to 6 preserve and protect irreplaceable trust data cones from in 7 this case. Counsel's position is all the more cause for 8 concern, given that he represents trustee delegates, 9 trustee delegates that have fiduciary obligations to 10 protect such information. Because after all, that 11 information is plaintiff's property. It's the property of 12 these trust beneficiaries we represent. And moreover, it 13 is disquieting at least as much, because we are now into 14 our ninth year in the trial court litigation, and in the 15 first month of the litigation, counsel for the parties 16 agreed that thereafter all documents relating to the 17 accounting and other fiduciary issues raised in the 18 complaint would be preserved, and when court order after 19 court order entered in the litigation since that time has 20 emphasized the Importance, the critical nature of retaining 21 information pertaining to trust management and accoutlng 22 issues. 23 That said, I want to turn to the facts. 24 JUDGE GINSBURG: '7ell, Mr. Austin, wait a minute, 25 let's stay with that for a minute. CLS 23 1 MR. AUSTIN: Yes, Your Honor. 2 JUDGE GINSBURG: In the 2001 decision, pardon me, 3 the Court placed some limitations on what, pardon me, we 4 thought the District Court might properly supervise by way S of getting to the goal of an adequate accounting, 6 historical accounting. 7 MR. AUSTIN: Yes. Yes, it did. 8 JUDGE GINSBURG: And that seams to me the source 9 of, while you expressed dismay, the source of the 10 Government's objection here that the, pardon me, that the 11 cause of action here is unreasonable delay, right? 12 MR. AUSTIN: No, Your Honor, in fact the cause of 13 action is for breach of trust. 14 JUDGE GINSBURG: Well, the common law claims 15 were -- 16 MR. AUSTIN: That is what this Court determined 17 in Cobell VI. 18 JUDGE GINSBURG: Pardon me, the common law claims 19 were dismissed, right? 20 MR. AUSTIN: Your Honor, what this Court -- 21 JUDGE GINSBURG: The Eighth -- go ahead. 22 MR. AUSTIN: -- recognized in Cobell VI, and 23 pardon me for interrupting, but I think it's a point that 24 bears making in response to Your Honor's question, what the 25 Court recognized in cobell VI is that even though the trust CLS 24 1 came into existence as a consequence of a statute Congress 2 enacted in 1887, once the Government took possession as 3 trustee of the trust property, of our client's lands and 4 interests related thereto, it assumed a variety of 5 obligations, and remedies came into existence that were 6 incident to the creation of the trust. Now, this is after 7 all a Mitchell Il-type trust, a trust similarly recognized 8 by the Supreme Court in the White Mountain Apache case as a 9 trust that incident to its formation and the trustees 10 taking possession of property creates duties, and those 11 duties exist unless Congress specifically disclaims them, 12 and there is nothing in this case where that has happened. 13 In fact, the 1994 reform act that counsel referenced added 14 to, supplemented, and by its terms expressly did not 15 subtract from the rights and remedies available to our 16 clients as beneficiaries of this trust. Now, in -- 17 JUDGE GINSBURG: Mr. Austin -- 18 MR. AUSTIN: Yes. 0 z 19 JUDGE GINSBURG: -- maybe this is a fundamental 20 misoonception on my part, but it seemed to me that the 21 dismissal of the common law claims and the 2001 decision of 22 this Court left us with a fairly somewhat narrowed and 23 fairly clear delineation of what the Government's 24 obligations are here vis-a-vis the trust, not denying that 25 it has this fiduciary role in terms of what this case is CLS 25 1 about and what the District Court is at large to demand of 2 the Department. And that was that it bore on unreasonable 3 delay in the discharge of its obligation to provide an 4 accounting under the '94 act. 5 MR. AUSTIN: Let me respond to that, if I could, 6 Judge, by making two points. First, the dismissal of the 7 common law claims was an order entered by the District 8 Court prior to this Court reviewing and modifying the 9 approach to the issues raised. Let me elaborate. Judge 10 Lamberth in deciding the Phase I trial and in entering his 11 Cobell V opinion December 21, 1999, looked for plaintiffs' 12 rights and the remedies available to them solely by 13 evaluating the terms of the 1994 reform act. In fact, the 14 District Court went so far as to reject the notion set 15 forth in the Manchester Band case decided 25 years earlier 16 that incident to the creation of this trust many years ago, 17 other trust law principles, including those arising under t 18 common law, were made available. That's part of what this C 19 Court clarified in Cobeil VI. It looked at what Judge 20 Lamberth had decided. It said your order is correct. 21 There is no need to do anything to change your order, but 22 your opinion is a little off the mark, and the substance of 23 this Court's analysis was incident to the creation of this J 24 trust over a century ago, and incident to the Government 25 taking possession as trustee of the property, trust law CLS 26 1 principles separate and apart from those expressed in the 2 1994 act were brought to bear. And hence, with all due 3 respect to what the District Court decided with respect to 4 the dismissal of common law claims, after this Court had 5 analyzed the matter and issued its opinion in cobell VI, 6 the picture was different. 7 Now, in analyzing the accounting obligation -- 8 JUDGE GINSBURG: One second. 9 MR. AUSTIN: Yes, Your Honor. 10 JUDGE GINSBURG: But the case is here, the case 11 was here in 2001 -- 12 MR. AUSTIN: Yes. 13 JUDGE GINSBURG: -- under the APA, correct? 14 MR. AUSTIN: The case was here in 2001 on two 15 bases: One, federal question jurisdiction arising under 28 16 U.S.C. Section 1331 as a consequence of trust beneficiaries 17 seeking to compel an accounting and other relief as 18 beneficiaries in the trust relationship. That is, 19 plaintiffs with property interests, with standing, with the 20 ability under common law and trust principles incident to 21 the creation of this trust to hold accountable the trustee 22 delegates in this matter. Alternatively, Your Honor is 23 correct. There was extensive APA analysis, but it was as 24 an alternative basis of jurisdiction, and Your Honor, it 25 reflected what I was talking about earlier. The approach CLS 27 1 that Judge Lamioerth had taken in the Phase I trial, where 2 his focus was what does the statute permit? What are the 3 remedies this reform act provides? And consistent with his 4 anaiysis and his reliance upon the APA, this Court affirmed 5 as an alternative basis for subject matter jurisdiction 6 purposes reliance upon the Section 06 analysis and the APA. 0 JUDGE GINSBURG: Well, Mr. Austin, maybe I just 0 have to go hack and start over by getting a grasp on this, 9 but here's what the Court said in 2001. I know it said a 10 lot of things, hut I don't know what else it said on this 11 score. 12 MR. AUSTIN: Yes. 13 JUDGE GINSBURG: That plaintiffs rely upon common 14 law trust principles in pursuit of their claim is 15 immaterial, as here they seek specific relief other than 16 money damages, and federal courts have jurisdiction to hear 17 such claims under the APR, right? I mean, that is how, and 16 that's where we proceeded. Then we asked about whether 19 there was final agency action and so on, approaching it as 20 we always do it under the APR. So I'm not sure what more 21 there is, or at least what more we upheld in 2001 other 22 than a valid statement of a claim for unreasonable delay or 23 agency action withheld. 24 MR. AUSTIN: Your Honor, let me turn to the 25 question, where does the duty to preserve the data come CLS 28! 1 from, because I sense from the Court's questions to counsel 2 that that is a subject of interest, and Cobe I answered I 3 that question. What this Court held three years ago was 4 that the broad accounting duty included or imposed 5 substantial subsidiary obligations, and those obligations 6 included among other things a duty to maintain records that 7 would be necessary to ensure a complete and accurate 8 accounting. Now, we submit, It couldn't be much clearer 9 than that. That, if there was any question on the subject, 10 made it clear this Court's view was there is an obligation 11 to preserve and maintain and protect trust information, 12 whether it's in papers or in electronic form. 13 JUOCE GINSBURG: Okay, let's just stay with that 14 one, because that's the key one, I think, too. 15 MR. AUSTIN: Okay. 16 JUDGE GINSbURG: So what we have is a case that's 17 here based on unreasonable delay in getting the job done, 18 and an admonition to the Department to, or let's say a 19 ratification from this Court of the District Court's 20 admonition to the Department to maintain records sufficient 21 to avoid further delay, right? Because it's all got to be 22 hinged on unreasonable delay, it seems to me. In the 23 several places in the opinion later on, the Court talked 24 about this admittedly unspecific limitation that the 25 obligations be geared to avoiding further delay as opposed CLS 29 1 to other problems that might arise, right? And if I can 2 find that passage, there's one that's very specific. Here, 3 the failure to implement a computer system is not itself 4 the breach; rather, it is indicative of appellants' failure 5 to discharge their fiduciary obligations in a reasonably 6 prompt manner. It's the promptness of this thing that's at 7 stake. There's no question about their obligation, right, 8 and what they have to do. It's the timeliness. 9 MR. AUSTIN: Well, we look at what this case 10 record shows, Your Honor, we're over a century into trust 11 administration. There has never been an accounting. There 12 has not been the accounting required by the 1994 reform 13 act. 14 JUDGE PMTDCLPH: Can you tell me what -- 15 NH. AUSTIN: There has not been an accounting 16 sought by plaintiffs in this action. 17 JUDGE !NDOLPH: Can you tell me what you mean by 18 an accounting? What do you mean by an accounting? C z 19 MR. AUSTIN: Again, this Court addressed that 20 question in Cobell VI. 21 JUDGE RkNDOLPH: No, what do you mean by it? 22 When you say there's never been -- 23 MR. AUSTIN: Judga, and I appreciate the 24 opportunity to address that. 25 JUDGE 91J\TDCLPH: There's never -- I'm just CLS 30 1 MR. AUSTIN: Because it informs what we're doing 2 here. 3 JUDGE DANDOLPH: Please don't interrupt me when 4 I'm trying to interrupt you. 5 MR. AUSTIN: I'm sorry. 6 JUDGE RANDOLPH: Do you mean an audit? Is that 7 what you mean? 8 MR. AUSTIN: No, no, very different matter. AN 9 accounting is an explanation, a documented explanation, a 10 showing transaction by transaction as to how the trustee 11 has conducted the administration of the trust, vested with 12 the obligation to demonstrate an undivided duty, ability to 13 avoid conflicts of interest, to exercise trust management 14 prudently. The accounting is the showing of that conduct 15 that is intended to be completo enough so that a 16 beneficiary receiving it can determine whether his or her 17 trustee has acted in accordance with those fiduciary 18 obligations. That is what it's about. 19 JUDGE RPJ400LPH: You're talking going baokward, 1: 20 right? 21 MR. AUSTIN: A historical accounting is certainly 22 that, sir. 23 JUDGE RANDOLPH: Did you present any evidence to 24 the District Court that indicated that on a going-forward 25 basis there were problems? CLS 31 1 2 3 4 5 6 / 8 9 10 11 12 13 14 16 17 18 19 20 21 22 23 24 25 MR. AUSTIN: Your Honor, part of what this lawsuit is about -- JUDGE RANDOLPH: No, did you present -- NP.. AUSTIN: -- is compelling changes. JUDGE RANDOLPH: Did you -- MR. AUSTIN: So yes, the complaint has from the get-go -- JUDGE RANDOLPH: No, that -- MR. AUSTIN: -- sought changes in management. JUDGE RANDOLPH: My question was evidence. Did you present any evidence that on a going-forward basis there were, there's mismanagement? MR. AUSTIN: Absolutely, and in fact the quarterly reports that have been filed by the trustee delegates in accordance with the Phase I proceeding demonstrate the problems and the various efforts, the plans to make plans, that have been undertaken to correct and resolve longstanding and continuing problems. JUDGE Pfd'TDOLPH: Here's why I'm, I'll tell you why I'm asking the question, and it hasn't come up yet in the argument, but the 2003 legislation says, as you know, that nothing in the '94 act requires the Department of Interior to commence or continue historical accounting activities. Now, to the extent that that suggests going backwards, then if the purpose of the Court's injunction ) a a z w a C a 1, CLS 32 I was to preserve information that would be used in a 2 historical accounting, then the statute, we've got a 3 question under the statute. Cn the other hand, if it's on 4 a going-forward basis, I don't know that the statute deals 5 with that, That's why I'm -- okay? 6 MR. AUSTIN: Thank you for that explanation, and 7 you're absolutely right. The short answer is that the need 8 to maintain trust data that is protected and secure goes 9 both to the historical accounting obligation declared by 10 the Court and also to the trust management. And as Judge 11 Lamberth noted in his March 15 opinion, the injunction 12 entered, the disconnect order that has been the focus of 13 counsel's remarks this morning, was entered not in regard 14 to that historical accounting obligation, although the 15 Court recognszed you've got to have recoros to uo an 16 adequate accounting, especially when you're going back 17 decades, but it was also necessary that that injunction be 18 entered to protect information needed to know how much 19 money the beneficiaries should receive to keep track of the 20 payments to which they're entitled. In other words, to 21 allow the Department of the Interior to function as a 22 fiduciary. 23 Let me address the facts with respect to these 24 obligations w&ve been talking about. First, just a point 25 about the standard of review here. We're dealing with CLS 33 1 preliminary injunctions, and the issuance of such relief is 2 subject to a deferential standard. The decision whether to 3 grant or deny a preliminary injunction, as this Court noted 4 in the National Wildlife Federation case, 835 F.2d at 19, 5 is to be reversed only if the District Court is shown to 6 have abused its discretion. Findings of fact are to be 7 reviewed under the clearly erroneous standard, and the 8 District Courts balancing of the factors, and we heard 9 talk from counsel about that, in deciding whether a 10 preliminary injunction should issue, is subject to 11 particular deference. 12 JUDGE ROGERS: I mean, one of the issues -- 13 MR. AUSTIN: Yes, Your Honor. 14 JUDGE ROGERS: -- though, that's raised, it seems 15 to me, by the Department is whether or not the Court, the 16 District Court, considered all of the proper factors, not a 17 question of second-guessing its balancing of factors but 18 whether it considered all of the factors. 19 MR. AUSTIN: Yes. In its July 28, 2003 opinion, 20 nearly 30 pages in length, and in the 29-page memorandum 21 opinion accompanying the disconnect order issued on March 22 15, the District Court made a careful evaluation of the 23 four factors as required by law. ) 24 JUDGE RANDOLPH: But it didn't consider the 900 25 pages of certifications. OLS 34 1 MR. AUSTIN: Absolutely it did, Your Honor. What 2 those certifications showed, and the question was asked of 3 Mr. Stern, why was the Court not satisfied, there were any 4 number of reasons why those certifications fell short of S the mark. One principal deficiency in them, and I'm 6 talking about a substantive deficiency, is that in the 7 declaration submitted by Mr. Cason (phonetic sp.) on behalf 8 of the Department of the Interior. He said there is no 9 uniform standard, and it is to be left to the discretion of 10 each bureau head as to whether or not systems are secure 11 enough. Questions were asked earlier about the consent 12 order that the Government proposed and urged the Court to 13 adopt two and a half years earlier. That consent order 14 said we pledge, we ccmmit to bringing cur insecure systems 15 with their significant deficiencies that require immediate 16 attention. We pledge to bring them into compliance with 17 0MB Circular A130, Appendix 3. That is the standard for 18 Executive Branch agency information security. What does 19 the record show after 33 months have passed? We heard 20 counsel say great strides have been made, improvements. 21 What does the record in fact show? In the 16th Quarterly 22 Report submitted by Interior to the District Court in 23 February of this year, that's about a month before the 24 disconnect order was entered, Interior acknowledged that of 25 the 62 systems housing or affording access to trust data, CLS 1 four, four of those computer systems had been certified and 2 accredited in accordance with the 0MB standard. That's the 3 standard the government said it would comply with. That is 4 the standard that the government's experts in this case, 5 when called upon to assess IT security in January of 2002, 6 in April of 2002, and there is voluminous testimony about 7 these issues. 8 JUDGE RANDOLPH: Are o'cu -- 9 MR. AUSTIN: That is the same standard -- 10 JUDGE RANDOLPH: Are you -- 11 MR. AUSTIN: -- these experts said had to be met 12 for there to be security. 13 JUDGE RANDOLPH: Are you supporting the District 14 Court's view that the certifications were procedurally If defective because they stated to the best of my 16 information, knowledge, and belief? 1 17 MR. AUSTIN: We, as our brief indicates, it is 18 clear that what was submitted did not comply with what the 19 Court directed, but there's much more to the picture than 20 that. 21 JUDGE RANDOLPH: No, no, no. 22 MR. AUSTIN: There are substantive deficiencies 23 that reveal the absence of security. 24 JUDGE RANDOLPH: Under 17, under 28 U.S.C. 1746, 25 the only thing that's required is that it be in a form CLS 36 1 substantially similar to the form that's set out there. Is 2 it your position that these certifications were not 3 substantially in compliance with the standard form, I 4 hereby declare this is true under penalties of perjury? 5 MR. AUSTIN: Yes, it is, and the concern is all 6 the greater, Judge, because of what was submitted under 7 cover of these jurats. 8 JUDGE RANDOLPH: No, I'm just, I just want to 9 focus in on that -- 10 MR. AUSTIN: Yes. 11 JUDGE RANDOLPH: -- the certification, the 12 language runder penalty of perjury.' 13 MR. AUSTIN: Yes, and -- 14 JUDGE RANDOLPH: Doesn't anybody always, isn't it 15 implicit that it's always to the best of your information, 16 knowledge, and belief when you put something in? 17 MR. AUSTIN: No, in fact, when on December 8, 1 18 2001, in this case, trustee delegates sought to modify the a 19 TRO that had been entered. !d by the way, itTs a 20 modification that the District Court readily granted. A 21 declaration was submitted by Catherine Clement in support 22 of a request to lift the TRO as to her agency, and that 23 jurat said what the statute requires. The information is 24 true is correct. It is based on my personal knowledge. 25 That is what is lacking. And that in combination with the OLS 37 1 significant, substantive deficiencies. 2 Let me just, and I think I'm out of time, so let me 3 just touch upon a couple of them that are most significant. 4 I mentioned the fact that nothing is said about the clear, 5 uniform standard that the Government has recognized governs 6 its conduct in the IT security area since at least December 7 2001, but there are other significant problems with these 8 certifications. They came in large measure from the same 9 people who provided the information compiled in 10 governmental reports. For example, a report made in 11 September of last year by the Inspector General of 12 Interior, and what the Inspector General said was we don't 13 have the ability to track incidents of intrusion. In other 14 words, we can't tell you how many episodes of hacking there 15 have been of these records, because we just don't have the 16 ability as yet. We're getting around to it. We don't have 17 the ability to do so. The same government report 18 acknowledged that there was an obligation to achieve 19 compliance with this 0MB standard that I've described and 20 that that obligation had not been met. None of the 21 certifications, Your Honor, none of the certifications even 22 made reference to that obligation. And that's a government 23 report issued a month after these certifications were made. 24 The certifications would cause one to wonder whether there 25 was any standard, any guidance whatsoever, when it is so CLS 38! 1 manifestly clear from the record in this case that there 2 are specific standards, that experts have been retained, 3 millions of dollars have been spent to come to understand 4 the terms of those requirements and to test for them. 5 Let me focus in closing -- 6 JUDGE RANDOLPH: I'm just wondering where the 7 burdens are here. Is it your position that you satisfy the 8 burden for a preliminary injunction on the basis that the 9 Department of Interior hasn't proven that its system can't 10 be hacked into? 11 MR. AUSTIN: It's not as, the question is 12 probably not as simple as that. It's based on the failure 13 on the reoord evidence of the Department to demonstrate 14 that its computer systems housing or accessing trust data 15 are secure. 16 JUDGE RANDOLPH: Well, that means they can't be 17 hacked into. 18 MR. AUSTIN: Well, again, it's more than that. 8 19 In part, Judee, it's about being able to know when there's 29 hacking. Counsel mentioned earlier that even the most 8 21 secure system may on occasion be hacked into, but the point 22 is a system -- 23 JUDGE RANDOLPH: But isn't it 24 MR. AUSTIN: that is accredited and certified 25 gives one the ability to know when that happens. OlAf 39 1 JUDGE RANDOLPH: Isn't it your burden to show 2 that it's not secure, not the Department1s burden to show 3 that it is secure? 4 MR. AUSTIN: The evidence of record 5 overwhelmingly shows the following: persistent insecurity 6 since 1969, when the first independent report advised the 7 Department of the Interior you've got a major problem. 8 That burden was created when Interior acknowledged in the 9 consent order of December 17, 2001, we have a major 10 problem. There are significant deficiencies. We need to 11 take immediate action to correct them. We need to comply 12 with this ONE standard. That was what was acknowledged 13 then, and so the question becomes what does the record now 14 show. 15 JUDGE FANDOLPH: The consent order is evidence of 16 the, supporting the preliminary injunction, is that the 17 idea? 18 MR. AUSTIN: Pdmolutely, Your Honor, because of 19 what it acknowledged, the admissions made therein by the 20 trustee delegates, the recognition of what the appropriate 21 standard of security was -- 22 JUDGE RANDOLPH: Where is the consent order in 23 this mountain of paper? 24 MR. AUSTIN: Your Honor, I know it is in the 25 first volume of the Joint Appendix. CLS 40 1 JUDGE RRNDOLPH: Okay. 2 MR. AUSTIN: 1 would be guessing somewhere in the 3 400s. I think that's as olose as I can provide the Court. 4 But at page 4 you'li see the representations that I'm 5 talking about, and at page 5 you'll seo the reference in 6 that order to the need to comply, to retain experts and 7 begin achieving compliance with the DM5 standard. And as 8 mentioned, as ci the time the Court was called upon to 0 decide the connection issue, four of 62 systems, that's 10 about 7 percent, had in fact been made concern per the 0MB 11 standard. The other 03 percent -- 12 JUDGE ROGERS: Let me ask you, though -- 13 MR. AUSTIN: Yes. 14 JUDGE ROGERS: -- what the, the special master 15 had -- 16 JUDGE RRNDOLPH: I've got it. 17 JUDGE ROGERS: -- approved the restarting up, I 5 18 can't think of the word right now -- 19 MR. AUSTIN: Reconnection. 20 JUDGE ROGERS: reconnection -- 21 MR. AUSTIN: Yes. 22 JUDGE ROGERS: -- of 66 systems at the time the 23 District Court entered this injunction, is that not true? 24 MR. AUSTIN: It is true that prior to the j 25 cessation of the testing that was agreed upon, and there GUS 41 I was, by the way, in the record, at JA 530 an agreement 2 reflecting this. At the time that the testing by the 3 independent expert ceased, the testimony in the record is 4 that approximately 95 percent of Interior's systems had 5 been reconnected, and they'd been reconnected, Your Honor, 6 even though most if not all the systems did not yet meet 7 the 0MB standard. 8 JUDGE ROGERS: No, but what 9 MR. AUSTIN: The understanding was there would be 10 further testing, and in the event vulnerabilities were 11 revealed, those systems could be disconnected. 12 JUDGE ROGERS: But that's what I'm getting at. 13 MR. AUSTIN: Yes. 14 JUDGE ROGERS: The very person the District Court 15 had, you know, agreed should look at this had made a 16 determination that although there would be further testing, 17 he was satisfied that the systems were secure enough to 18 allow the Department to reconnect 66 of them. Now as I a 19 understand it, you're taking a different -- maybe it's just 1: 20 in response to guestions you're taking the position that in 21 fact the District Court could not find that the systems 22 were secure until they met the 0MB standard and until that 23 time they could not be reconnected. Is that your position? 24 MR. AUSTIN: No, let me, I appreciate the 25 question being raised, because I do want a chance to CbS 42 I explain. What was agreed upon was that systems could be 2 reconnected, even if they did not meet the 0MB standard as 3 yet, provided that in exchange for that reconnection the 4 special master and his IT security consultants would engage 5 in vulnerability testing, other testing, in order to 6 determine whether the reconnected systems were in fact 7 secure, and the letter agreement signed by Mr. Cason on 8 behalf Interior of February 16, 2002, provided that if in 9 the later testing there were major vulnerabilities, 10 suggesting the systems should be disconnected, Interior 11 agreed they would be, so when that testing arrangement, 12 external, independent validation of IT security, when that 13 arrangement was lost, owing to the uimpasseu described in 14 the District Court's July 28 opinion, what the master said IS was without the independent testing, I have no confidence 16 that systems reconnected are in fact secure. And in fact, 17 Your Honor, the record referred to by the District Court in 18 its March 15 opinion indicates that there were numerous 19 vulnerabilities -- 20 JUDGE ROGERS: All right, but -! 21 MR. AUSTIN: -- reported by these experts when 22 they tested reconnected systems. 23 JUDGE ROGERS: But of the 66 systems, I mean, the 24 premise had been that some sysfems could be reconnected, 25 though the testing was not complete and though the 0MB CLS 43 1 standard was not met. What I'm not clear on is why in 2 exercising authority the District Court had to go as far as 3 it did, namely to say disconnect everything, as distinct 4 from saying I need information as to the specific systems 5 where there is a hacking problem that the Department has 6 not adequately addressed. 7 MD. AUSTIN: Well, as -- 8 JUDGE ROGERS: In other words -- 9 MR. AUSTIN: Yes. 10 JUDGE ROGERS: you had agreed, as I understand II it, to this interim position that the Department could 12 reconnect pending further testing. 13 MR. AUSTIN: Right. As indicated earlier, part 14 ot the problem is, part of the challenge in making these 15 systems secure is that they aren!t equipped, haven't been 16 equipped over time with the type of instruments needed to 17 detect hacking, so that*s Problem No. 1. Yes, we know the 18 special master hacked on several reported occasions, but we a 19 have no idea the extent to which that type of intrusion has 20 occurred over time. That gives rise to the risk of 21 irreparable harm that was at the heart of the District 22 Court's decision. 23 JUDGE ROGERS: But everybody knew that at the m 24 point when these 66 systems were reconnected. 25 MR. AUSTIN: Yes. What the District Court CLS 44 1 concluded, again, exercising its discretion, confronted 2 with an arrangement that had been promising, that had been 3 working. Testimony of the defendants was that the 4 arrangement with the master was a productive one, that S vulnerabilities were discerned that could then be 6 corrected. Once that arrangement went by the boards, the 7 Court was left with choices. It could have on July 28 said 8 disconnect. You've rejected my attempt at judicial 9 oversight. In faot, the attempt at judicial oversight that 10 you, defendants, encouraged me to adopt, and so now it's 11 tine to disconnect. Instead, it gave trustee delegates the 12 best possible chance to make their best showing. It said 13 certify the security of these systems. It said provide a 14 plan for security going forward. Frnd then seven months 15 later, after carefully analyzing the contents of the 16 submissions, what did the Court conclude? The Court 17 concluded what has been presented, and of course this is 18 the fact-finder making determinations based upon a 19 voluminous record, what has been presented doesn't 20 demonstrate that this irreplaceable trust data is in fact 21 secure. And that is the basis for the Court's decision. 22 I want to address briefly, if I could, and I know I'm 23 way past my time, what the Court was challenged to decide. ) 24 It had tried a variety of other approached. It had given 25 these defendants every conceivable opportunity to solve CLS 45! 1 this problem for themselves, and so the March 15 2 disconnection order was entered with that three-year effort 3 behind the Court. There really was no other choice to 4 protect and preserve trust data. Otherwise, it would 5 continue to be at risk of irreparable harm. JUDGE ROGERS: Well, let me ask you, what 11m 7 trying to understand here is that as 1 recall when the 2001 8 case was argued, the Department had gotten appropriations 9 from Congress, contracted with this new computer company, 10 and then the whole system, it failed, these are my words, 11 that the computer company overpromised what it could 12 deliver, because when it started to implement under the 13 contract with the Department, in fact it could not produce 14 the record or the system that the Department needed. So my 15 point is is that itts not as though the Department!s 16 sitting on its hands, and of course it is delayed somewhat 1 17 !by Congress, because it has to go through the congressional 18 appropriations process, so therets been a period of time 19 when things are not perfect. But until the time of the 20 special master hacking, there was no evidence that anyone 21 had hacked into the system. And in the situation that we 22 live in an imperfect world, even when you are bound by 23 trust obligations, the question is do you go so far here 24 where at least the way the system was working with the 25 special master, systems were allowed to be reconnected even CLS 46! 1 though they were not perfect in terms of meeting the 0MB 2 standard or they may not he subject to hacking or Interior 3 may not even know the systems are being hacked into. 4 MR. AUSTIN: But that is precisely what the S Court's March 15 order now contemplates. You don't have 6 the special master anymore, but instead what the Eistrict 7 Court has directed is that Interior submit the names of 8 independent contractors, and they could even be supervised 9 by Interior this time as opposed to the District Court, to 10 provide independent verification, and it is entirely 11 conceivable were the trustee delegates to proceed to comply 12 with the terms of the March 15 order that you would have 13 resulting a process of reconnection, system by system, very 14 much like the system that the defendants urged the District 15 Court, over the plaintiffs' objections, incidentally, to 16 enter on December 17, 2001. 17 The point is without substantial assurance based on 18 the defendants' own certifications that IT security had 19 been achieved, the Court had to find another way to protect 20 irreplaceable trust data, data that must be had for 21 historical accounting purposes, for trust management 22 purposes, and in order to accomplish that the Court has now 23 put in place an order that gives at any time, at any time ) 24 the defendants the ability to come forward and say this is 25 our plan, this is our information. We've got it now. We CLS 47 1 have the security issue resolved. And so with that in 2 mind, these 93 percent of the systems that I made reference 3 that are as yet not certified or accredited could begin 4 being reconnected. Here as before, subject to the 5 understanding that the goal is eventually to achieve with 6 respect to all standards compliance with the ONE standard. 7 JUDGE PJJ4DOLPH: What is preliminary about this 8 inJUnc!ion. 9 MR. AUSTIN: Your Honor, the December 17, 2001 10 consent order that the defendants urged the Court to adopt II contained a provision at the end that said upon achieving 12 compliance with the ONE standard, this order may be 13 vacated. ThatTs what is contemplated. It is an 14 understanding, a recognition that the Court needs to be 15 involved to the limited extent that it is necessary to 16 maintain record evidence that must be had in order to 17 fulfill the trustee delegates! fiduciary obligations. But 18 when that standard is met, Intericr is able to function 19 without oversicht. 20 JUDGE R!lDOLPH: The typical preliminary 21 injunction is preliminary because itts an injunction 22 pending a trial on the merits. 23 MR. AUSTIN: Yes. 24 JUDGE RNDOLPH: But I don't understand why is 25 this, what is the merits, substantial likelihood on the CLS 48 1 merits. What merits are we talking about? 2 MR. AUSTIN: Okay, we have had, this is a 3 bifurcated proceeding, and per a 1998 trial court order, 4 Phase I has occurred. That trial was intended to 5 determined what needed to be done to fix the system, and 6 the Court's order, as mentioned earlier, was affirmed by 7 this Court in Cobell VI. The Phase II proceeding is yet to 8 be accomplished. Remarkably enough, 117 years after this 9 trust got created, 10 years, almost 10 years into the 10 litigation, a full 10 years after the 1990 reform act. So 11 there is a further proceeding at which time, Your Honor, it 12 is understood that the reconciliation and adjustment of the 13 trust account will take place. That is the reason for the 14 retention and protection of relevant information in order 15 to perform a court-ordered accounting that the information 16 from which would be utilized in making that final 17 determination to what extent is the trust balance to be 18 adjusted. In fact, Your Honor, if you iook at it from that C, 19 perspective, what the District Court has endeavored to do 20 time after time in getting the trustee delegates to achieve 21 IT security is all in the Government's favor, because in 22 the end, if the systems aren't secure, if records needed to 23 do an accounting aren't maintained or are lost, corrupted, 24 destroyed, you name it, if that information is unavaiiable, 25 the inferences to be resolved with respect to the trustee CLS 49 1 are all against the trustee. It is absolutely in the 2 interest of the United States Government -- 3 JUDGE PANDOLPH: It's preliminary to 4 MR. AUSTIN: -- to keep all such information for 5 this Phase II purpose. 6 JUDGE RANDOLPH: It's preliminary to a trial on 7 the merits about whether the Government's systems or 8 information is accurate to enable a historical accounting? 9 Is that the idea? 10 MR. AUSTIN: Part and parcel of the Phase II 11 proceeding that I've described would be issues relating to 12 the security of these systems, because of course the 13 information presented and relied opon by the trustee 14 delegates would need to be tested. Is it admissible? Is 15 it reliable? What has been done to protect these 16 electronically stored records against change, against 17 manipulation, against damage in the course of unwarranted 18 intrusions? So all of those issues will be brought to 19 bear, ano hence it as absolutely in the interest of the 20 fiduciary to meet the standards, to comply with 0MB, to 21 take on the task of the remaining 93 percent of these trust 22 information-containing systems and to make them secure as 23 soon as possible. And most certainly it is in the interest 24 of our clients, who continue to wait for the long-promised 25 accounting, the court-directed accounting, who continue to CBS 50 1 wait for reforms that will bring the trustee delegates into 2 compliance with their fiduciary obligations to maintain 3 these records. These trust records are our clients1 4 property. The loss of these records constitutes the 5 ruination of the trust. That is contrary to the obligation 6 imposed on even the Government as a trustee as recognized 7 by the Supreme Court in the t&hite Mountain ApRche case. 8 That is the challenge. It is a shared challenge. 9 JUDGE RFU!DOLDH: Okay, I've got it. 10 JUDGE GINSBURG: Judge Rogers, any further 11 questions? 12 JUDGE ROGERS: No, thank you. 13 JUDGE GINSBURG: Thank you, Mr. Austin. 14 MR. AUSTIN: The order should be affirmed. Thank 15 you. 16 JUDGE GINSBURG: Mr. Stern? You used all your 17 time. I don't suppose you need much now or want much now. 18 C C 19 REBUTTAL ARGU!ENT OF M!K STERN, ESQ. 20 ON BEHALF OF THE APPELLANTS 21 22 MR. STERN: I'll try to be brief, though there 23 was a lot said. 24 One thing, the answer on to what it1s preliminary to 25 is really nothing. I mean, there's been, this is it. CLS 51 1 Whatever they had to show has been shown, and so then the 2 question is what was shown here? Has there been a 3 demonstration that there's some connection between any of 4 this relief and the performance of the accounting? No. 5 Absolutely not. ?md what plaintiff really is standing here 6 and telling you is that doesn!t really matter. There's a 7 free-floating fiduciary obligation to maintain records. 8 Nobody's saying the Government doesn't have fiduciary 9 obligations. How and when they are actually capable of 10 judicial enforcement is a very different matter, and what 11 would the standards be for coming in to determine what it 12 appropriate Internet security, There is no showing here of 13 any problem that's actually ever occurred to any trust 14 record that's irretrievable. IS JULGE RANLOLPH: Well, there is that statement in 16 the consent decree, I looked at it, that says the 17 Department admits that there are significant deficiencies j 18 In the security of the Indian Trust data. 19 MR. STERN: Absolutely, You: Honor, but were 20 there problems? Of course there were. Did we also say, I 21 think it's on virtually the next page in the Joint Appendix 22 in responding to plaintiffs' motion for a preliminary 23 injunction, we also said look, when we said that, we don't 24 mean that there's been any showing whatsoever that the 25 underlying, you know, records have been compromised. I CBS 32 I mean, you know that wasn't, you know, what we said was, you 2 know, yeah, there are problems. Everyone knows, you know. 3 to this day half the agencies or more are getting, you 4 know, Es on their general reports cards. You know, to say, 5 everybody that there are different problems, and there's a 6 straw man built up here about uniform standards, you know, 7 which is addressed, you know, you know, in Mr. Cason's S declaration. This is just a red herring. I mean, all the 9 uniform standards of the 0MB circulars, they address a 10 million things, just, you know, of which, of which security 11 is just, of which this kind of security is only one of 12 them, and all of those oirculars in turn like recognize, 13 they leave judgment calls based on risk and cost to the 14 indIviduals who are managing things. That's not something 15 that Interior made up. That's something that's recognized 16 throughout the Government. 17 JUDGE ROGERS: So the Government's position is, 18 just so, and I know this goes a little further, but there 19 should be no injunction whatsoever, that the plaintiffs 20 have prevailed on liability, and in order for them to 21 actually get a judgment of money, what do they have to do? 22 MR. STERN: Money? Plaintiffs, the only reason 23 that we're not in the Court of Federal Claims is that 24 plaintiffs 25 JUDGE ROGERS: No, no, I mean, that people have CLS 53 1 owned, I mean, I could spell it out for you, but people 2 have owned property over years. There's a value associated 3 with them. How are they to get the dollar figure? 4 MR. STERN: Well -- 5 JUDGE ROGERS: How are they to continue to get "a 6 royalty"? What should, so I'm clear from the Department's 7 point of view, if the records are, according to the 8 Department, unreliable, then where do the plaintiffs go? 9 MR. STERN: Well, Your Honor, there's no, I mean, 10 that's part of what, you know, is that an agency produces 11 an accounting. That's a final agency action. 12 JUDGE ROGERS: All right, so your point is 13 just -- 14 MR. STERN: If there's a problem, you can review 15 16 JUDGE ROGERS: I see, just let the agency produce 17 an accounting, have a trial on that, and that's the end of 18 the matter. 19 MR1 STERN: If, well, have, you know, it's 20 subject to, you know, I don't know trial, but it's subject 21 to judicial review like any other final agency action would 22 be, but there's no sort of discrete sort of standardless 23 Internet security duty floating around there capable of 24 being enforced, much less getting final, do whatever is, in 25 essence final injunctions based, when there's never been a CLS 54 1 single witness who has appeared and we don't know what the 2 standard would be, and we don't know what the source of the 3 duty is other than general statements about the fact that 4 the United States is a fiduciary which nobody denies, but 5 that doesn't translate into a series of different kinds of 6 enforceable actions. And that's the problem that this case 7 has turned into. 8 JUDGE RLJ'TDCLPH: Well, finish your sentence, the 9 only reason we're not in the Court of Federal Claims. 10 MR. STERN: Is that plaintiffs had disclaimed 11 back in at the time of, the Government moved to dismiss is 12 prior to this Court's 2001 decision, and they said, look, 13 you know, if these guys, you know, you know, want money, if 14 they want money they should go to the Court of Federal 15 Claims. The plaintiffs said no, we're not asking for 16 money. The District Court makes that absolutely clear. 17 The idea is, and that's why I was a little astonished to 18 hear a statement about the balance of the trust fund being 19 adjusted at the conclusion of this, since, as the District 20 Court notes, plaintiffs have represented that all of the 21 money is in the fund. They're just looking for the proper 22 accounting. So if, you know, this is not a suit to get 23 money. It could not have been. That's the basis on which 24 it has stayed in this Court all along. And what this Court 25 really did say and correctly is, look, do, you know, do an CLS 55 1 accounting, sort of define to some extent what should be in 2 that accounting, and it said, you know, go ahead and do it. 3 And that's what the Department has been trying to do. 4 JUDGE Pfl\TDCLPH: So there can be no claim in this 5 case, because it's here rather than in the Court of Claims, 6 that Mr. and Mrs. X on the Navajo reservation are entitled 7 to more royalty payments than they've received? 8 MR. STERN: No, we don't think that there's a, I y mean, we don't think that there's a claim for actually 10 getting money in this case. Now, the accounting, you know, 11 could be taken, you know, as, you know, evidence to the 12 extent that there is a cognizable claim for getting money 13 that's in a claim that's not time-barred. You know, maybe 14 like the accounting, you know, sort of would form part of 15 somebody's action in the Court of Federal Claims. But this 16 accounting -- 17 JUDGE P!NDCLPH: Is there, what is the statute of 18 limitations? C z 19 MR. STERN: That's a subject that's also the 20 subject of considerable debate. The District Court has 21 said that there are no statute of limitations, because no 22 statute of limitations can begin to run until a trust duty 23 is repudiated, and that therefore since the trust duty has 24 not been repudiated, the statute of limitations can't run, 25 though of course it kind of has a strange idea of that you CLS 56 1 actually have a claim that arises before the claim occurs, 2 so you've got the claim hut it can never be time-barred. 3 But that's a matter that's addressed in the other case. 4 This is something that, you know, this really is, this 5 is an important thing. It's not the accounting isn't 6 important, but you can't come in here, as plaintiffs are 7 doing, and saying, well, here's what, you're a fiduciary, I 8 can therefore require you to do something about Internet 9 security based on standards like identified by nobody, and 10 there's no evidence that would connect it to what this case 11 is about or to any other form of statute. And -- 12 JUDGE ROGERS: So I could just clarify one other 13 matter? And that is as to the '94 act, when Congress 14 itself set up this Office of Special Trustee, and the 15 special trustee came up with a need, identified the need to 16 improve these accounting systems so that the records would 17 be secure and that the accounting could be done. Is it 18 your position that that is totally separate from the suit 19 that the plaintiffs have brought? 20 MR. STERN: It's separate in the sense that the 21 legal duty here is an accounting unreasonably delayed, and 22 that's what this Court make 100 percent clear in 2001. 23 It's not to say that the entire universe of things that the 24 Department of the Interior should be doing is encompassed 25 by this lawsuit. I mean, there are lots ot things the CLS 57 1 Department, you know, like should, you know, could be 2 doing. That's, but, you know, the Court doesn't sit to 3 order sort of systemic, you know, action. It's focused 4 here on one thing, which is the unreasonable delay in that 5 accounting, and it didn't like among all the other things 6 that are addressed in the structural injunction, it doesn't 7 also like get to sort of say, well, and how about Internet 8 socurity? 9 JUDGE RANDOLPH: If I ask you about historical IC accounting, what does accounting mean to you? 11 MR. STERN: Well, I don't think it means to the 12 same to me that it means to Mr. Austin, but the Interior 13 plan which is set out basically says that the accounting is 14 sort of, you know, what you'd get from your bag. I mean, 15 it's sort of, it's a statement of transactions, and, you 16 know, the Department -- and I'd have to correct, I said 17 that the paper records were being transferred now to 18 computer, but because of the current statute, I don't think 19 that is happening. I just wanted to correct that. The, 20 but basically you get a statement of account that shows 21 your transactions, and that's the accounting, and because 22 of the historical component, the Department goes back to, 23 you know, the plans call for the Department to go back and 24 assemble all the ledgers going back to, you know, 1938 for 25 open accounts. CLS 58 1 JUDGE RANDOLPH: If I think of reports, if I 2 think of accounting in a corporate respect or audits, you 3 know, the generation of financial statements is always, 4 it's just a snapshot of a particular moment in the S corporation's existence, and it's always historical. It's 6 necessarily historical. It's always what happened in the 7 past. Obviously in the future it's not an accounting, it's 8 just a projection of what will happen in the future. So if 9 we're talking about accounting in that respect, everything 10 is historical accounting. Now, is that your understanding 11 of what's meant by that term? 12 MR. STERN: Your Honor, we're somewhat guided by 13 what this Court said, and I don't, it obviously wasn't our 14 position, but we're trying to comply with this Court's 15 mandate. But for us, the accounting is, you know, is the, 1 you know, it's the ledger, it's of transactions, and we're 17 doing It like not only going forward, we're doing it going 18 backward. There's also a separate sort of audit 19 verification/reconciliation function that the Department is 20 also doing, not just going forward, which it is, but going 21 backwards. You know, and that's, you know, and that's what 22 the Interior plan, you know, calls for, because it's done, 23 you know, I mean, obviously, it's tomorrow's case, but, I 24 mean, we've done everything we could, you know, to like 25 meet any understanding possible of what this Court's, you CLS 59 I know, 2001 decision meant. 2 And the other thing I'd like to add is that while this 3 Court stayed part of the injunction when it came up, you 4 know, in March, there are parts of Interior that continue 5 to be offline that, you know, there is no legal basis, no 6 factual basis. It's certainly the Government certainly, 7 and we think it's hurting class members. It's not helping 8 anybody. And we would ask that therefore that, you know, 9 to the extent that this Court, you know, can decide this 10 matter, you know, sooner rather than later that, you know, 11 there really is a significant ongoing burden that's, you 12 know, wholly unjustifiable that's being placed by these 13 orders. 14 JUDGE GINSBURG: Thank you, Mr. (indiscernible) 15 Pardon me, Mr. Stern. And Mr. Austin, both, thank you. 16 The case is submitted. 17 (Recess.) FOAM lEO PENGAL) * I BoG 631 6!JA9 a HI4 ci] !1 it hi HI 0 0) 1] HI C) CD Cl) cD (_) o 0 HI F-' H HI C) HI Ti 0) tQ F--I 1 (1) H- ---I o a (9 ! I-i F' HI a Di 0 N N a r" !-h rt H- ID a LC o ! P! (0 NJ ! a Cr1 (0 0 CD 3! < HI 0) ID w c-r -! H! ! (I) El- Fj! I C) O (1) it it o hi * c--i- o m H- !1 H HI fr!J fl Q ID hj 0] (0 o c-C) HI ! 0 CU ! H' H Cxi ç1 !1 !i it ! L (! hi F-! U) H' o Co 0 ci I"-i H rt 11 0 (0 t! LU I-1 0(0 ITh 1) ft- c-f m 0