1 UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT 2 3 4. - 5 ELOUISE PEPION COBELL, et al., 6 Plaintiffs-Appellees, v. No. 05-5068 8 GALE A. NORTON, SECRETARY OF THE INTERIOR, et al., 10 Defendants-Appellants. 11 12 Friday, September 16, 2005 13 Washington, D.C. 14 The above-entitled matter came on for oral 15 argument pursuant to notice. 16 BEFORE: 17 CIRCUIT JUDGES GARLAND AND SENIOR CIRCUIT JUDGES WILLIAMS AND SILBERMAN 18 19 APPEARANCES: 20 ON BEHALF OF THE APPELLANTS: 21 MARK B. STERN, ESQ. 22 ON BEHALF OF THE APPELLEE: 23 G. WILLIAM AUSTIN, III, ESQ. 24 25 Deposition Seivices, Inc 6245 Executive Boulevard Rxkville MD 20852 Tel: (301) 881-3344 Fav: (301) 881-3338 inf&J3epositionSevices coin www.D epositionSetvices corn HDC 2 CONTENT S ORAL ARGUMENT OF: PAGE Mark E. Stern, Esq. On Behalf of the Appellants 3 G. William Austin, III, Esq. On Behalf of the Appellee 25 HDC 3 1 PROCEEDINGS 2 THE CLERK: Case number 05-5068, Elouise Pepion 3 Cobell, et al. V Gale A. Norton, secretary of the Interior, et 4 al., Appellants (indiscernible) 5 ORAL ARGUMENT OF MARK B. STERN, ESQ. 6 ON BEHALF OF THE APPELLANT 7 MR. STERN: May it please the Court. District court 8 has reissued the accounting portions of the structural 9 injunction that this Court vacated in December of last year 10 and the question now is whether the Court should vacate those 11 provisions again. Structural injunction runs afoul of two 12 fundamental principles, both of which were reemphasized by 13 this court in its last opinion, both of which are strongly 14 contested by the plaintiffs. 15 First, imposing billions of dollars of requirements, a 16 Court must consider whether, in fact, congress mandated or 17 even authorized those requirements and second the limitations 18 on the judicial (indiscernible) emphasized by the Supreme 19 Court in Southern Utah and by this Court in its December 2004 20 decision really do have application to this case. A court can 21 direct an agency to take action. It cannot properly formulate 22 a plan, require the agency to undertake it in the form of an 23 injunction and then superintend its compliance in an action 24 under 7061. 25 THE COURT: Do you agree that Southern Utah and HDC 4 1 Lujan are not directly applicable to this case? 2 MR. STERN: No, Your Honor, we think that they are 3 directly applicable. 4 THE COURT: So this case is no different, in your 5 view, than any APA case? 6 MR. STERN: I don't know that it's no different. I 7 think that the Court in its 2004 decision, I think that the 8 language that it used was the nature of this case as an Indian 9 Trust case, not fully neutralize the applicability. 10 THE COURT: Right, we said that the application of 11 Lujan and Southern Utah is complicated by the availability of 12 common law trust precepts to flesh out the statutory mandates 13 and we said in Cobell VI, I'm still quoting from the same 14 opinion, at least partially limits the deference that we would 15 normally owe the defendants in administering the statutes with 16 which they are charged. 17 MR. STERN: Yes, we accept that, Your Honor. 18 THE COURT: And then at the same time, just two or 19 three days before that, this Court also held in the IT case, 20 that contrary to the secretary's view, while the Government's 21 obligation are rooted in and outlined by the relevant 22 statutes, they're largely defined in traditional, equitable 23 terms and the narrower judicial power's appropriate under the 24 APA do not apply. We said that too, right? 25 MR. STERN: You did, Your Honor. HDC 5 1 THE COURT: So we can't, I take it you agree, that 2 we don't look at this case just like any other APA case. The 3 fact that the secretary has trust (indiscernible) 4 responsibilities, makes a difference with respect to the 5 Court's remedial authority. 6 MR. STERN: It makes a difference. The question is 7 what difference? 8 THE COURT: How much of a difference? 9 MR. STERN: Yes. 10 THE COURT: Okay. 11 MR. STERN: Now, I mean, you know, we take as, you 12 know, a given -- 13 THE COURT: You either have to take a little bit 14 louder or 15 MR. STERN: -- all those points. 16 THE COURT: -- my hearing -- 17 MR. STERN: I'm sorry, Your Honor. 18 THE COURT: I wonder why I'm having a difficulty 19 hearing. 20 THE COURT: I thought it was the power of the center 21 chair. 22 THE COURT: I can't hear anything. 23 THE COURT: Is that mic on? 24 MR. STERN: Is this better? 25 THE COURT: It's up. Thank you. HDC 6 1 THE COURT: Yes. 2 MR. STERN: I'll try to speak up. 3 THE COURT: Maybe you should pull it closer to you. 4 THE COURT: It looks like it's falling off the edge. 5 It doesn't move? 6 THE COURT: It doesn't move. 7 MR. STERN: This isn't going. This one doesn't go 8 up or down either. 9 THE COURT: Your neck has to go up and down. 10 MR. STERN: That I can do. The question is what 11 kind of a difference does it make and we do think that the 12 December 2004 opinion, which is consistent, we think, with the 13 2001 opinion, does identify what limitations on the judicial 14 role and it also states that while the duties that may be 15 imposed, they have got to be rooted in a statute, that the 16 Court can look to common law duties to fill that out. We 17 don't necessarily expect Congress to be as -- 18 THE COURT: Counsel, I wonder if I could ask you, 19 one of my colleagues could agree, if you could focus, start 20 specifically focusing on the points in the injunction you 21 think are erroneous? 22 MR. STERN: Yes, Your Honor. 23 THE COURT: Instead of going to the general 24 philosophy. If we understand clearly what your alleged errors 25 are then we can talk about the general law. HDC 7 1 MR. STERN: Yes, Your Honor. 2 THE COURT: And I wasn't so clear reading your 3 briefs whether you clearly identified what the errors are. 4 For instance, I didn't understand why we have before us the 5 questions of the statute of limitations. I don't understand 6 that at all. Is that really before us? 7 MR. STERN: Well, it's there, Your Honor, because -- 8 THE COURT: It's there. Is it before us? 9 MR. STERN: Well, we think it is before you because 10 it's part of an opinion that's before this Court, and that 11 ruling has potentially significant ramifications and we think 12 it's clearly wrong as a matter of law. We don't think that 13 the question before this Court is whether, we're not asking 14 this Court -- 15 THE COURT: Wait a minute. Has any judge, has the 16 district judge made any decision on the statute of 17 limitations? 18 MR. STERN: The District Court has ruled essentially 19 that there is no statute of limitations. 20 THE COURT: Essentially. 21 MR. STERN: Well, there's no, I mean, I think that 22 is what the Court ruled. The Court said that until the trust 23 is repudiated that the statute of limitations cannot run and 24 so right now -- 25 THE COURT: That is a statement he made but is there HDC 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 anything in his order that relates to that? MR. STERN: It's certainly possible that in the district court's view of how that order would then operate and how it would be -- THE COURT: Wait. Wait. Wait. But counsel you understand what I'm trying to do. I'm trying to figure out what specific part of the injunction is in front of us now. !Jhat error was made? Not general discussion of law but what specific errors are before us? MR. STERN: I think our major concern simply that that is a ruling that is now in the if we do not bring it to this Court's attention with that is case and that then there will be arguments at a later point that the Government did not appeal in order at the proper time -- THE COURT: And the defendants would be subject to contempt if they cut on which the statute MR. STERN: THE COURT: decision on that whi MR. STERN: THE COURT: other points? off the accounting with respect to issues had run. That's exactly right. You think he has made a specific ch is (indiscernible)? I think that it's absolutely clear. I wasn't sure about that. What are the MR. STERN: Well, the other, I mean, there are about five primary items that we identify in -- HDC 9 1 THE COURT: If you would, tick them off? 2 MR. STERN: -- the brief on substance. One of them 3 involves the sort of two questions of do you go back to do an 4 accounting for all accounts to back to the beginning of the 5 trust relationship in 1887 or do you -- 6 THE COURT: I think that is fairly before us. I 7 agree with you. 8 MR. STERN: Yes. And then the -- 9 THE COURT: And your view is that is inconsistent 10 with prior opinions of this Court? 11 MR. STERN: And the statute. 12 THE COURT: Yes, well, I'll stick with prior 13 opinions of the Court because they interpret the statute. 14 MR. STERN: Right. 15 THE COURT: Right? Right. 16 MR. STERN: And related to that issue, or do you go 17 back and do an accounting for closed accounts, in other words, 18 an account that could have been closed 30 years ago. 19 THE COURT: I think that's fair -- 20 MR. STERN: -- and -- 21 THE COURT: That's fairly before us too. 22 MR. STERN: Right and those are two key items. 23 THE COURT: Yes. 24 MR. STERN: Another item is do you do a recreation 25 of all the land transactions since 1887? That's another HDC 10 1 fundamental. 2 THE COURT: Wherever the money went. Wherever the 3 revenue went. 4 MR. STERN: Well, those are related. 5 THE COURT: Yes. 6 MR. STERN: This is -- 7 THE COURT: I understand. That's legitimately 8 before us too. I understand that. 9 MR. STERN: Right. 10 THE COURT: Okay, what else? 11 MR. STERN: There's the related to that is the 12 question of what you have to do in terms of verification. By 13 verification, in other words, what the Department of the 14 Interior has proposed to do and we've been saying consistently 15 for years is plan to go back and recreate on the basis of 16 electronic and paper records a full statement of all the ins 17 and outs, you know, deposits and withdrawals for all those 18 open accounts going back to 1938 and in addition -- 19 THE COURT: Correct me if I'm wrong, my 20 understanding was for transactions, I think it is, $5000 or 21 more, you would go back and look at the underlying land 22 transaction which produced the addition to the account? 23 MR. STERN: Exactly, Your Honor, then there's a 24 second step that Your Honor refers to which is to do something 25 more than the recreation of the records. And remember at the HDC 11 1 time that Congress passed this statute and at the time this 2 Court's 2001 decision the picture the people had was, you 3 know, the records might not even be there. We couldn't 4 recreate, you know, these ledgers and today, though there's 5 been a very different view, partly because we've spent over 6 100 million dollars in the meantime but now there's a very 7 different view, like, you know, lots of stuff has been 8 assembled. You know the project, it went back for all the 9 named plaintiffs and their predecessor accounts, turned out 10 that in fact the available records were a whole lot better 11 then anybody believed they were. But in addition to do that, 12 just getting those records together, then the next level is to 13 see, to get a sense of well, how well, you know, was the 14 system actually functioning in terms of what was, you know, 15 when you had a specific land transaction, so when the money 16 came in, did the right amounts then actually get credited to 17 everybody? So it's not only can I give you your records, can 18 I go back and see how the entire thing worked to be accurate. 19 And there, for that, it would be for high amounts in the land 20 based transactions, Interior would look at them, you know, for 21 each transaction separately. 22 THE COURT: Any other issues? 23 MR. STERN: Well, related to that, just let me 24 finish on that, is that for the smaller amounts, Interior 25 would use sampling and the District Court has said again, no, HDC 12 1 you cannot do that. 2 THE COURT: This is the, now you're getting into the 3 sampling issue? General sampling issue or specific as it 4 relates to that last issue? 5 MR. STERN: That's the District Court that is vital 6 in doing that function, you know, whether you call it 7 verification or audit, to make that at all feasible, Interior 8 has to be able to use sampling. It can't go back for every 9 transaction in every account and try to get that -- 10 THE COURT: And it's your position that the district 11 judges are, how should I say, hostility to sampling is not 12 warranted by prior opinions of this Court? 13 MR. STERN: That's correct, Your Honor. And so 14 that's another key portion of it. And then there are items 15 that are related to this sort of that you could say they're 16 subsumed but they're sort of listed separately so you have to 17 go back and revisit every probate determination -- 18 THE COURT: Right. 19 MR. STERN: -- you know -- 20 THE COURT: Yes. 21 MR. STERN: -- that was made. I mean, you know, so 22 there are some items like that. 23 THE COURT: Okay, now I have another question for 24 you. Basic question. What is the significance of the latest 25 appropriations rider limiting the accounting cost to 58 HDC 13 1 million dollars? How are we to take that? 2 MR. STERN: I don't think that the appropriations 3 rider is, the latest appropriations, you know, is dispositive 4 of anything but what -- 5 THE COURT: It isn't? 6 MR. STERN: Well, we think, well, look at it this 7 way, Congress has made absolutely clear of what it is 8 appropriated for this year and -- 9 THE COURT: It's also making clear what it isn't 10 appropriated for. 11 MR. STERN: And it's also made it clear -- 12 THE COURT: (Indiscernible.) Judge Williams -- 13 MR. STERN: -- what it -- 14 THE COURT: Judge Williams' point it seems, is, I'm 15 amazed at your position. I thought you would come in -- 16 MR. STERN: I withdraw -- 17 THE COURT: -- and say -- 18 MR. STERN: I withdraw it. 19 THE COURT: Well, hold because I'm not totally 20 amazed. So, after you have finished amazing Judge Silverman, 21 I'll (indiscernible) . I'll ask you a question then. 22 JUDGE SILBERMAN: I assumed you would take the 23 position which I understand which Judge Williams suggests that 24 Congress has said 58 million dollars and no more. That 25 doesn't mean it has to be up to 58 million dollars but it HDC 14 1 can't exceed that. 2 MR. STERN: New -- 3 JUDGE SILEERMAN: Is that true or is that not true? 4 MR. STERN: Yes, it's absolutely true. 5 JUDGE SILEERMAN: Now, what significance does that 6 place upon litigation? 7 MR. STERN: I think that again, it goes back to the 8 question of can you, what is Congress' what, that you cannot 9 order an accounting. This is a perspective administrative 10 matter and what Congress means to appropriate and what 11 Congress intends to -- 12 JUDGE SILEERMAN: Counsel, let me ask a question. 13 MR. STERN: -- are vital. 14 JUDGE SILEERMAN: Let me ask the question again. 15 What is the legal significance of Congress's limit of 58 16 million dollars? How does that affect this lawsuit? How does 17 this affect the possible injunction? How does it affect the 18 plans the department of interior comes forward? How does it 19 affect, what is the legal significance of it? 20 MR. STERN: I think that the legal significance is 21 in this, I mean, there's both a this year significance but 22 taken over time with several years and Congress' action 23 there's also a long term significance that we know the Court 24 cannot really order within this fiscal year that more money be 25 spent on historical -- HDC 15 1 JUDGE SILBERMAN: Well, this is where I'm getting 2 off the amazed bus just for the moment. 3 MR. STERN: I knew it. 4 JUDGE SILBERMAN: And I assume that the reason that 5 you were making this as a dispositive argument is that this 6 probations act only applies for this year so we don't know 7 what Congress would do the following year. Now we can make 8 political judgments but unfortunately or fortunately that's 9 not our job. All we know from the statute is how much can be 10 spent this year, right? 11 MR. STERN: That's right. But that's why it's 12 significant to look at the long term sort of history of what 13 Congress has always said. 14 JUDGE SILBERMAN: Well, we have three series of, I 15 guess three appropriations bills here, right? These three, 16 and this one is limited to this year. The one before was 17 limited to that year. Now, the one before that was quite 18 different. The one before that said don't do anything. 19 Right? Congress could have passed a statute that said don't 20 do anything. They didn't. And they could have passed a 21 statute for this appropriations year which said don't do 22 anything. But they didn't. So, with this track record of 23 these three appropriations bill it's a little hard for me to 24 plot the graph as to what Congress will do the following year. 25 MR. STERN: Right, but we're not asking the Court to HDC 16 1 plot the graph in that way. What we think is significant is 2 to go back to what Congress always understood this accounting 3 to be about and that takes you back to 1992 with the original. 4 JUDGE SILBERMAN: So in other words you're not 5 taking the position that the 58 million dollars is a permanent 6 lid on the amount of money that can be spent on the accounting 7 process? 8 MR. STERN: No, it's a fiscal year. 9 JUDGE SILBERMAN: Okay, so the only legal 10 significance is you can't spend more than 58 million dollars 11 this year? 12 MR. STERN: That's right. 13 JUDGE SILBERMAN: So it has no significance with 14 respect to the district judge's remedy assuming they are based 15 as they should be under Corbell XIII on appropriate legal 16 grounds, it has no significance as to what the cost might be 17 over five or six or seven, eight years? 18 MR. STERN: It has, I mean, to the extent that you 19 could comply with one year's worth of those provisions within 20 that 58 million dollars, that would be right. 21 JUDGE SILBERMAN: No, let me just hold. That 22 actually my question. I was going to get back on your amazing 23 bus here for a moment. With respect to the one year, is there 24 some element of the structural injunction that it would be 25 impossible for you comply with because it would cost more than 17 within that time period? I mean, it's a very long injunction. I haven't looked at all the time You have a time schedule that it would be to comply with given only 58 million? MR. STERN: The answer is, Your Honor, I don't know. JUDGE SILBERMAN: Okay. MR. STERN: The -- THE COURT: I thought your argument was that the appropriation for '06, plus the pattern and the previous language of Congress suggests a very strong judgment against spending resources on accounting that are vastly disproportionate to the amounts of actual trust corpus at issue? MR. STERN: That's exactly right, Your Honor. THE COURT: That is a concept that would apply, first place, apply very strongly in terms of the compliance with the injunction during fiscal '06, in terms of setting priorities and presumably, although maybe Congress will appropriate 6 billion, you know, seven, it hasn't done that, but presumably there would be a general reasonableness overlay for the entire injunction, right? MR. STERN: I think that's a bit -- THE COURT: MR. STERN: THE COURT: HDC 58 million structural schedules. imp o s sib 1 e 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 And that would require prioritizing. No, that's right. I mean, when -- Wouldn't that be true whether or not HDC 18 1 Congress had put the cap on appropriations for the '06 fiscal 2 year? 3 MR. STERN: Yes, but the -- 4 JUDGE SILBERMAN: Has this court ever specifically 5 held that? That their accounting remedies should not be 6 disproportionate to the value of the corpus? 7 MR. STERN: I don't know that the Court has held 8 that but it would have to be, first -- 9 JUDGE SILBERMAN: Let me raise the point, at any 10 point -- 11 MR. STERN: Yes, I mean -- 12 JUDGE SILBERMAN: -- (indiscernible) litigation? 13 MR. STERN: Yes, I mean a fundamental point of this 14 appeal is not only has Congress not like required or 15 authorized this, it would, Congress when it looked at this and 16 nobody can explain, plaintiff's do not explain why the members 17 of Congress who said this was nuts were wrong. 18 JUDGE SILBERMAN: Can I hold on this for one second? 19 So, maybe I can get what I regard as the crux issue here. 20 What you just said requires us to look at individual 21 statements of members of Congress and as you know there is 22 some disinclination to do that. But why not look to general 23 equitable principles -- 24 THE COURT: Exactly. 25 JUDGE SILBERMAN: -- which actually both sides seem HDC 19 1 to be in complete agreement on. That is, your position is 2 that it's going to cost 12 billion dollars to do this and 3 there is not 12 billion dollars or anything like this that is 4 owed to the beneficiaries. Their position is the same. They 5 disagree with how much is owed to the beneficiaries but their 6 position is that this 12 billion dollars, it would be a 7 mistake to spend it. So as far as I understand the point, the 8 settler of the trust, the trustee, and the beneficiaries all 9 think that it would be an abuse discretion which is our 10 standard of review, for anyone to spend more money on the 11 accounting then there is money available or money owed to 12 beneficiaries. That's right, isn't it? 13 MR. STERN: I think you'd have to confirm with 14 plaintiff's counsel. 15 JUDGE SILBERMAN: Don't worry, I'm not asking you 16 speak for them. I understand that there's some difficulty in 17 you speaking for them or in them speaking for you. Not only 18 in this case but in every case. But that, but without getting 19 into the nitty gritty of the specifics of the structural 20 injunction, your underlying position is is that it's an 21 abusive discretion to spend more money on an accounting then 22 there is available to distribute to the beneficiaries, right? 23 MR. STERN: Broadly speaking, that's right, Your 24 Honor. 25 JUDGE SILBERMAN: So if that's the case -- HDC 20 1 THE COURT: Actually, if I might interrupt for just 2 a second, if I understand the other side's position, it's not 3 that the judge committed an abuse of discretion, it's rather 4 that there's an impossibility of performance because of the, I 5 think it's the, because of the appropriation limitation. 6 MR. STERN: Yes, that's right. I mean, plaintiffs 7 say look, I mean, they've got a whole variety of reasons. 8 JUDGE SILBERMAN: They're getting ready. They'll be 9 happy to tell us. 10 MR. STERN: Yes. 11 JUDGE SILBERMAN: They'll be happy to tell us as 12 soon as you're -- 13 MR. STERN: A couple points about how these 14 equitable principles work out here and they both go back to 15 common law trust principles and to statute or and to general 16 principles, you know, that govern implementation of 17 requirements that money spent from the fisc and I think that 18 they both work together here and there really is the case that 19 a court looking in a case like this when we're looking not, 20 we're looking at a forward looking implementation of the law 21 and a court really cannot, I think, properly order the 22 billions or even a millions of dollars be spent if there's a 23 reason to believe that Congress not only didn't require but 24 didn't even authorize it. 25 And relatedly common law trust principals have to be HDC 21 looked at in marrying up common law as the principles with those of general principles. In common law trust as this court previously recognized, the expenses are for doing any kind of an accounting, are paid for by the trust itself so that there's a normally a conversation that takes place between the beneficiary and in the trustee that says I want X and X kind of account and but trustee can say that well that's fine but that's going to cost X amount and there has to be completely disregarding the principle that we all seem to otherwise agree on. Is there no mechanism by which the government can bring that process to an end? MR. STERN: Well, Your Honor, I don't know all -- THE COURT: And if there isn't, why doesn't -- MR. STERN: Well there have been. THE COURT: -- Interior ask Congress for authority? MR. STERN: I mean there have been efforts to, in the past, you know, to end the fractionation process and to consolidate land holdings and they, I believe that one of them 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 some judgment made about rationality THE COURT: Mr. Stern, I have a background question. Your open brief gives an account of this parcel of land worth $8000 on which the government is annually spending nearly $18,000 to handle the accounting for the income which is a small fraction of the $8000. Is there no, in the first place, it would seem to be a case where the government itself is HDC 22 1 ended up being subject to Supreme Court decision that found 2 that one to be valid. 3 THE COURT: Well, that was without compensation. 4 MR. STERN: Right. There are, I mean it's an 5 ongoing concern and yes, there are ongoing efforts to find a 6 way legislatively to end one is -- 7 THE COURT: I just think an ordinary trustee would 8 very insidiously seek out those ways that and implement them. 9 MR. STERN: Well, no, that's right but you know, as 10 professor I might testified on behalf of the Government this 11 trustee can go to Congress and try to get things changed but a 12 real trustee doesn't have to deal with a situation like this 13 one and all the restraints which are involved which is another 14 reason why the analogs between common law Judies and the way 15 this trust operates while that's the only relationship that 16 got to be looked at with regard to the specifics of this 17 trust. So in the end it really -- 18 JUDGE SILBERMAN: So why didn't you make the 19 argument that without regard to Congress' appropriations, 20 which is a tricky area as we've just discussed, that it's an 21 abuse of discretion for the Judge to order an injunction that 22 will cost for accounting much more than the corpus of the 23 trust? It's a simple argument. I don't see it in your brief. 24 MR. STERN: Well, we say that even under common law 25 principles this would be wrong but -- HDC 23 JUDGE SILBERMAN: Where? MR. STERN: -- our point it's not. It's -- JUDGE SILBERMAN: Where? Where in your brief do you argument? MR. STERN: I'd have to find -- THE COURT: He'll have a chance on rebuttal to that. MR. STERN: Yes, but the key point is -- THE COURT: But only if you hurry up because your red light's been on for a long time. MR. STERN: Thank you, Your Honor, I'll just finish one point, is that for us, it's not just a question of equity in the air, you really do look to what Congress has required or not required and we think that going to the statutory language, to its original legislative history, that the district court's and to -- JUDGE SILBERMAN: There's nothing that, I appreciate there is something in the legislative history but there's nothing in the language that makes the argument, that express argument that you're making now, right? What in the original language would you be relying on? MR. STERN: You have to read a lot into the language that you provide daily and annual account balances for trust fund holders to get from, for funds invested pursuant to the 1938 Act, language that clearly contemplates open accounts, monies that were invested pursuant to the 1938 Act -- make that 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 HDC 24 1 JUDGE SILBERMAN: I'm talking about the more general 2 argument that is made in the legislative history which is this 3 balancing of corpus against accounting. That language isn't in 4 the text of the statute, is it? 5 MR. STERN: No, but what we think the significance 6 of it is that it confirms that Congress, both that and the 7 Arther Anderson experience to Congress because Congress was 8 actually looking at something that had been done. 9 THE COURT: Would that legitimately be before us if 10 Congress hadn't said a word about anything on -- 11 MR. STERN: That's right. We would be -- 12 THE COURT: Because of the incorporation of common 13 law trust principles. 14 MR. STERN: That's right, but we do think that what, 15 the fact, I mean, I don't want to fight like a one way of 16 winning in favor of another -- 17 JUDGE SILBERMAN: This takes up back to where we 18 started. If you come in and say this is just an APA case and 19 we should not look at equitable principles at all, may turn 20 out to be worse for you then if you argue that we should look 21 at equitable principles. 22 MR. STERN: Your Honor, we're happy to have the 23 Court look at equitable principles but we do think that when a 24 court is directing the expenditure of funds from the treasury 25 it has to look in determining, it can't exercise equity HDC 25 1 without looking to what Congress is authorized or required and 2 that's the sort of simple proposition we're offering. 3 THE COURT: Sure, we could say, you can only spend 4 58 million dollars a year for the next 25 years. 5 MR. STERN: Yes, and what we also know is when 6 Congress passed the statute -- 7 THE COURT: Right, that would have been a staggering 8 amount of money. 9 MR. STERN: Right. It would be, I mean, look, with 10 this 13 billion is all, is equivalent of all the money that 11 has ever passed through this trust. 12 THE COURT: No, we understand. We understand the 13 point. I'm still puzzled why you didn't make that direct 14 argument or maybe it's implicit in what you're arguing. I 15 hope it's implicit. 16 MR. STERN: I think it is. I believe it is at least 17 implicit. 18 THE COURT: We'll hear from Mr. Austin now. 19 MR. STERN: Thank you. 20 ORAL ARGUMENT OF G. WILLIAM AUSTIN, III, ESQ. 21 ON BEHALF OF THE APPELLEE 22 MR. AUSTIN: May it please the Court. Good morning, 23 my name is -- 24 JUDGE SILBERMAN: Do you agree with Judge Garland's 25 characterization of your position? HDC 26 1 MR. AUSTIN: Judge Garland expressed as best I can 2 recall opinions regarding a number of issues and positions. 3 JUDGE SILBERMAN: No, he said your position was the 4 district judge engaged in abuse of discretion. 5 MR. AUSTIN: No, I do not. 6 THE COURT: Maybe he thinks that's implicit. 7 MR. AUSTIN: Let me address that question because it 8 really is fundamental to what is at issue here and what the 9 Court should do about it. 10 JUDGE SILBERMAN: Judge Garland thought that you 11 were conceding that the district judge engaged in abuse of 12 discretion. 13 MR. AUSTIN: No. The district judge was faithful to 14 the mandates of this court, faithful to the evidence 15 presented, made the decisions this Court directed him to do, 16 telling the judge you've got to exercise an additional level 17 of oversight here because the level of resistance -- 18 JUDGE SILBERMAN: But you concluded -- 19 MR. AUSTIN: -- of fulfillment of duties -- 20 JUDGE SILBERMAN: You concluded, let me push you 21 here. You concluded the district judge's order is impossible 22 to perform. Why is it -- 23 MR. AUSTIN: Your Honor, this -- 24 JUDGE SILBERMAN: Excuse me. 25 MR. AUSTIN: Yes. HDC 27 1 JUDGE SILBERMAN: You did say that in the brief. 2 Why is it impossible to perform? 3 MR. AUSTIN: Well, that is, in fact, what we have 4 been convinced for years now, but I want to give the district 5 judge a fair shake -- 6 JUDGE SILBERMAN: You'll get a -- 7 MR. AUSTIN: -- in regard to that issue. 8 JUDGE SILBERMAN: You'll get a chance to come back 9 on that. I knew you didn't say, you did not say he abused his 10 discretion. I hear you. 11 MR. AUSTIN: No. 12 JUDGE SILBERMAN: But you did say -- 13 MR. AUSTIN: And that is not our position. 14 JUDGE SILBERMAN: -- his order is impossible to 15 perform. 16 MR. AUSTIN: He was not -- 17 JUDGE SILBERMAN: Why is it impossible to perform? 18 MR. AUSTIN: Okay. Just to complete the response 19 regarding the district judge. He made the decision that was 20 correct based upon the information he was provided. In fact, 21 as the Court is aware -- 22 JUDGE SILBERMAN: Counsel. 23 MR. AUSTIN: -- his injunction asked -- 24 JUDGE SILBERMAN: Counsel, in the appellant, excuse 25 me. The appellant argument that's useful to respond to the HDC 28 1 Judge's question. 2 MR. AUSTIN: Yes, Your Honor and -- 3 JUDGE SILBERMAN: Now, my question -- 4 MR. AUSTIN: -- that I will endeavor to do. 5 JUDGE SILBERMAN: -- to you, in your brief you said 6 the judge's order is impossible to perform. Why? 7 MR. AUSTIN: The record is filled with information 8 suggesting that -- 9 JUDGE SILBERMAN: Since when? 10 MR. AUSTIN: -- and plaintiffs have believed that 11 for years, but -- 12 JUDGE SILBERMAN: Wait a minute. 13 MR. AUSTIN: -- what has brought the issue to the 14 forefront, Your Honor, is the disclosure. For the first time 15 in this litigation, on March 9 of this year, in a declaration 16 submitted by Deputy Interior Secretary Casen, stating this 17 accounting that the Court has directed be done will cost 12 to 18 13 billion dollars, possibly significantly more. That's at 19 page 1 of the declaration. 20 THE COURT: But the numbers have always been very 21 high. 22 MR. AUSTIN: Your Honor -- 23 THE COURT: The numbers at the time -- 24 MR. AUSTIN: -- they have been -- 25 THE COURT: -- of the -- HDC 29 1 MR. 2 THE 3 MR. 4 THE 5 MR. 6 numbers were 7 THE 8 MR. 9 THE 10 MR. 11 last year but 12 In fact, last 13 14 15 16 17 18 19 20 21 22 23 24 25 AUSTIN: They have been talked about. COURT: -- last year's decision -- AUSTIN: They were talked about. COURT: -- were enormous. AUSTIN: You're correct. Multibillion dollar discussed -- COURT: I think it's a quibble between -- AUSTIN: -- last year. COURT: -- six and 12 billion. AUSTIN: Numbers of that kind were discussed they were never submitted to the District Court. year, when the appeal, initial appeal was brought regarding the earlier structural injunction, to get the ball rolling, the defendants filed notices of appeal and requests for stay and when information was included in a stay request, submitted to the District Court to satisfy circuit rule 8, the defendants then obtained an administrative stay from this court and took the position and the proceedings below hands off. You can't look at this. Yes, information in the media, in the halls of Congress, has been bandied about with respect to cost figures. But Your Honor -- THE COURT: All right, Counsel. MR. AUSTIN: -- if you look at the record -- THE COURT: Counsel. MR. AUSTIN: -- the first time that it has been HDC 30 1 revealed that not only are the cost what they are -- 2 THE COURT: Counsel. Stop. 3 MR. AUSTIN: -- but the impossibility and 4 impracticability results -- I'm sorry, Your Honor. 5 JUDGE SILBERMAN: Have you argued before -- 6 MR. AUSTIN: The first time is (indiscernible) 7 JUDGE SILBERMAN: Have you argued before this Court 8 before? 9 MR. AUSTIN: I have not appeared before this 10 particular panel, Your Honor. 11 JUDGE SILBERMAN: Have you argued before this Court 12 at all? 13 MR. AUSTIN: Yes, I have. 14 JUDGE SILBERMAN: And when Judges ask questions do 15 you normally stop and hear the question and then answer? 16 MR. AUSTIN: I do my best, Your Honor. Let me -- 17 JUDGE SILBERMAN: Your best is not adequate. Let's 18 try from now on in to listen to the questions. 19 MR. AUSTIN: Yes, sir. 20 JUDGE SILBERMAN: When the March submission was made 21 by the Government, what did the district judge do? 22 MR. AUSTIN: The district judge had no opportunity 23 to do anything. The submission was made to this Court, not to 24 him. 25 JUDGE SILBERMAN: Okay. Did -- HDC 31 1 MR. AUSTIN: The request was to stay the order based 2 on information the district judge was not provided. 3 JUDGE SILBERMAN: Did the district judge have any 4 information concerning the cost of the injunction? 5 MR. AUSTIN: None had been submitted to him in 6 connection with what he was asked to decide. And the 7 information about costs that was discussed last fall was never 8 presented to him at any time, even though the order he entered 9 on September 25th of 2003 contained the following provision. 10 Inform me immediately if you are aware, defendants, of any 11 information bearing on your ability to comply with the 12 timetables set forth in this injunction. That identical 13 provision line for line, word for word, is in the February 23 14 order issued by the Court. It is in section 4(b) (5), of the 15 order and it states, if you are aware of any circumstance, you 16 tell me. This is a judge who as I said earlier, was faithful 17 to his charge. He was doing what this Court had directed him 18 to do. He was not provided with information that we have been 19 maintaining for years, could make all the difference because 20 he was searching for, and attempting to implement a 21 reasonable, appropriate, equitable remedy and based on the 22 information that he had at the time, that approach was to 23 enforce the obligations declared by this Court four and a half 24 years early in Cobell VI. 25 JUDGE SILBERMAN: So prior to this appeal there was HDC 32 1 no submission to the district judge at any time as to what the 2 cost of the nature of the accounting he was contemplating 3 would be? 4 MR. AUSTIN: Judge, I know it seems remarkable. I 5 mean, consider, the Court invited Interior to submit a plan. 6 JUDGE SILBERMAN: Is the answer to my question no? 7 MR. AUSTIN: No, the answer to your question is yes, 8 and consider how remarkable that is that no information -- 9 JUDGE SILBERMAN: Wait a minute. There may have 10 been a double negative. 11 MR. AUSTIN: Okay. 12 JUDGE SILBERMAN: My question was, listen to the 13 question again. 14 MR. AUSTIN: Yes, sir. 15 JUDGE SILBERMAN: Are you saying that at no point 16 did any party submit to the district judge any information 17 concerning the cost of the accounting he was contemplating? 18 MR. AUSTIN: Interior submitted a projected cost of 19 its accounting plan which it projected in January of 2003 as 20 335 million dollars. It never provided the Court with any 21 estimate with respect to the cost of proceeding to rectify the 22 breach of trust duty that this Court had identified in Cobell 23 VI. 24 JUDGE SILBERMAN: Counsel. 25 MR. AUSTIN: Consider the significance. Yes? HDC 33 1 THE COURT: Where in your brief here do you say that 2 the 12 billion was a revelation? 3 MR. AUSTIN: Your Honor, in my brief -- 4 THE COURT: I mean, I see you do say that the staty 5 motion -- 6 MR. AUSTIN: Yes. 7 THE COURT: -- introduces the 12 billion dollar 8 figure but there's a great deal in your impossibility segment 9 of the brief that isn't focused on that and it doesn't seem, 10 the drift of that section is not that this is pulled out of 11 the blue. 12 MR. AUSTIN: Your Honor, in fact, it was. This 13 information was never provided to the district judge and that 14 is why, that is why we submit the appropriate next step is to 15 remand the record to the District Court to allow this further 16 information, the cost, the statements, the confessions of 17 impracticability and impossibility to be considered by the 18 district judge so that he can then wrestle with the question. 19 THE COURT: Are you saying that the defendants in 20 this litigation, until that submission to the Court of 21 Appeals, never raised the issue of the reasonableness of 22 spending more on accounting then was in the trust? Because I 23 certainly have the strong feeling back in 2004 that that issue 24 was very present in the case. 25 MR. AUSTIN: The argument was made in 2004, as it is HDC 34 1 being raised again, that the cost of rectifying declared 2 breaches of trust duty is more valuable than the amount of the 3 trust. In fact, as Your Honor recognized -- 4 THE COURT: And did the District Court -- 5 MR. AUSTIN: -- in Cobell XIII -- 6 THE COURT: -- at any time grapple with that 7 proposition? 8 MR. AUSTIN: The District Court in it's September 9 25, 2003 opinion talked about costs, made reference to the 10 Cobell VI determination that the factor that expense would be 11 incurred did not excuse non-compliance for an unreasonable 12 delay. 13 THE COURT: So that issue is right before us then. 14 Excuse me, Counsel. 15 MR. AUSTIN: Yes. 16 THE COURT: Listen carefully. 17 MR. AUSTIN: Yes, sir. 18 THE COURT: The judge has made a legal ruling that 19 the expense of the accounting and its relationship to the 20 corpus is irrelevant in terms of his remedy. Is that correct? 21 MR. AUSTIN: The Court made the ruling that it made 22 based on the information available to it. The Court did not 23 have -- 24 THE COURT: Yes, but it adopted a principle. 25 MR. AUSTIN: -- before it -- HDC 35 1 THE COURT: Right? 2 MR. AUSTIN: The court did not have before it the 3 following information which is so important that I am doing my 4 job bringing it to this panel's attention. 5 THE COURT: Well, if the district judge ruled that 6 the cost was irrelevant with respect to remedying violations, 7 then it seems to me he's made a legal ruling that is clearly 8 before us. Isn't that correct? 9 MR. AUSTIN: He made a legal ruling because 10 defendants have consistently disputed our contention, what was 11 being requested was impossible. He made a legal ruling based 12 on the evidence presented. It was not before him -- 13 THE COURT: I'm saying, give me that sentence again? 14 MR. AUSTIN: It was not before, the information that 15 is before this court. 16 THE COURT: I understand that. 17 MR. AUSTIN: The March 9 motion said there would be 18 no value derived. 19 THE COURT: What is the position that you 20 repeatedly -- 21 MR. AUSTIN: I'm sorry. 22 THE COURT: -- advocated? That what you were 23 requesting was impossible? Because, I mean, that's the way it 24 came out. 25 MR. AUSTIN: The position that we have advocated is HDC 36 1 that it is impossible for the government to rectify a breach 2 of trust duty that has been allowed to go unremedied for so 3 long at such a level of malfeasance and recalcitrance -- 4 THE COURT: You aren't saying that you oppose the 5 structural -- 6 MR. AUSTIN: -- that an accounting cannot be 7 accomplished. 8 THE COURT: Are you saying that you oppose the 9 structural injunction? 10 THE COURT: Yes, that's what I understood to be your 11 point. You have opposed -- 12 MR. AUSTIN: The position that we took, as is 13 reflected in our January 6th, 2003 submission is this. In our 14 plan to achieve a proper adjustment of account balances, we 15 spent the first 35 pages saying the record demonstrates an 16 accounting cannot be accomplished. Too many records -- 17 THE COURT: All right. 18 MR. AUSTIN: -- have been destroyed. 19 THE COURT: Can I, let me interrupt for a moment 20 now. 21 MR. AUSTIN: Yes. 22 THE COURT: I certainly didn't mean to imply the 23 implication that Judge Silberman said which is that you were 24 agreeing that the District Court had abused its discretion. 25 Okay, we'll start with that. But I do want to figure out HDC 37 1 exactly what your position is and how much different it is 2 from government's with respect to the structural injunction. 3 Now, I appreciate there is something else you want. But what 4 we have before us today is a structural injunction. 5 MR. AUSTIN: Yes. 6 THE COURT: Now, as I read your briefs, I'm going to 7 read them to you because I want to know what you agree with 8 still and what you don't. My understanding is that you never 9 wanted a structural injunction and that you don't want it 10 today. In fact, you've asked us, although you didn't ask for 11 a vacation, you did ask for a remand, right? That's right. 12 MR. AUSTIN: Yes. 13 THE COURT: Compound questions. 14 THE COURT: I'm sorry. You a.) you've never asked 15 for a structural injunction and you don't want one? Is that 16 correct? 17 MR. AUSTIN: We have not requested a structural 18 injunction because we have convinced for some time based on 19 the evidence known to us that it would be a complete and utter 20 futility. 21 THE COURT: Well, why wasn't that an abuse of 22 discretion then? 23 MR. AUSTIN: --that justice would not be -- 24 THE COURT: And then Judge Garland's point. Why 25 wasn't that an abuse of discretion? HDC 38 1 MR. AUSTIN: But Your Honor, I don't know why the 2 other side didn't argue it. Perhaps it's because the 3 information that is the basis of determining an abuse of 4 discretion was not provided to the District Court. 5 THE COURT: Counsel, if you sang telling the judge 6 we don't want it. The other side says we don't want it and he 7 gives it anyway, why is that not abuse of discretion? 8 MR. AUSTIN: The other side didn't take the position 9 we don't want it. The other side took the position here's our 10 plan and go with it. And that's -- 11 THE COURT: Well, that certainly -- 12 MR. AUSTIN: -- that's where the difference is. 13 THE COURT: If that wasn't a pretty clear position 14 against the alternative I don't know what you want. 15 MR. AUSTIN: Let me propose this to the panel 16 members and Judge Silberman, if I hadn't done as good a job as 17 I needed to be doing to listen to your questions, I want to 18 take a moment and apologize and perhaps offer an explanation. 19 First, I want to thank the Court for expediting this 20 proceeding. We value the opportunities to be before the 21 Court. We have a sense of urgency about our responsibility 22 representing 500,000 trust beneficiaries to be here and when 23 the opportunity arrives to make the most of them. Apparently 24 I tried doing too much at making the most of it. 25 THE COURT: As you've noticed Judge Garland will HDC 39 1 give you all the time you need. You don't have to worry about 2 that. 3 MR. AUSTIN: Not only are all the members of 4 litigation team present today for this argument but Eloise 5 Cobell, our lead plaintiff has traveled here from Montana to 6 be present and she is here and we are so eager to present our 7 position because we look to the Court with the following 8 confidence and I believe that it helps explain what I've, to 9 this point, feel I have not done a sufficient job of 10 presenting. 11 We believe that when the Court is given sufficient 12 information, to see the situation for what it is, that the 13 Court will then direct the principles of equity brought to 14 bear, that we not waste millions of dollars pursuing futility, 15 that instead we move ahead -- 16 THE COURT: Well, counsel, I -- 17 MR. AUSTIN: -- with achieving a just and fair 18 outcome. 19 THE COURT: I am confused. What is it that you 20 want? 21 MR. AUSTIN: Okay. 22 THE COURT: If you do not want accounting, what do 23 you want? 24 MR. AUSTIN: This is what -- 25 THE COURT: The case is in a -- HDC 40 1 MR. AUSTIN: This is what we want. 2 THE COURT: Excuse me. 3 MR. AUSTIN: We want remand to the Court. 4 THE COURT: Let me finish my statement or question. 5 MR. AUSTIN: Yes, sir. 6 THE COURT: If I understood this case to be about a 7 request for an accounting, if you now don't want an 8 accounting, why are you here? 9 MR. AUSTIN: We filed a lawsuit nine years and three 10 months ago, seeking to compel an accounting. You're 11 absolutely correct. Judge Williams in the Cobell XIII 12 described the accounting right as a purely instrumental right. 13 The ability to shine the light back in time, and in this case 14 that's got to be a pretty powerful light because you're 15 talking about 120 years, to see what has gone on so that our 16 clients, the beneficiaries, then have some idea as to the 17 value of their claims. That instrumental right, I would 18 submit to you, is an invaluable property interest. So we have 19 for, nearly a decade sought to enforce that obligation. But 20 we've got to face facts and that's what we're here to urge 21 this Court to help us, join with us in seeing and directing 22 the District Court to do it as well. 23 The facts dictate the kind of remedy that can 24 reasonably be provided. We submit, the way to determine what 25 the facts allow, with respect to an appropriate equitable to look -- MR. AUSTIN: THE COURT: MR. AUSTIN: THE COURT: seeking an accounting MR. AUSTIN: accounting but -- THE COURT: MR. AUSTIN: excuse me, sir. THE COURT: Counsel. Counsel. -- Cobell VI -- Counsel, wait a minute. Stop. Not to address those to remand -- Counsel. Yes, sir. Stop for a second. You don't want an We want a remand to the District Court Counsel. I'm asking -- -- at additional facts. I'm asking this question. Are you or not? We are definitely, we have sought an No, are you at this point? -- we recognize under principles of Excuse me. At this point are you HDC 41 remedy is not to proceed to address the arguments being raised and by the way they've been raised, my goodness, Cobell XII, Cobell XIII THE MR. THE MR. THE MR. THE accounting? COURT: AU ST IN: COURT: AU ST IN: COURT: AU ST IN: COURT: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 equity -- abandoning the request for an accounting? MR. AUSTIN: No. The accounting is this invaluable HDC 42 1 right as Judge Williams recognized in Cobell XIII. We are not 2 abandoning it but we recognize if so much has been done to 3 prevent that right from being exercised in any meaningful way, 4 then under principles of equity we have to look elsewhere. We 5 have to accept this is not a perfect world. My goodness, 6 given the record -- 7 THE COURT: Doesn't that sound -- 8 MR. AUSTIN: -- of this case -- 9 THE COURT: Doesn't that sound like you're 10 abandoning the request for an accounting? 11 MR. AUSTIN: No, not at all. We are asking this 12 Court to do the following: 1. Remand to the District Court. 13 THE COURT: For what? 14 MR. AUSTIN: To direct the District Court to do the 15 following. Immediately commence proceedings to determine 16 whether in fact the order directly them that an adequate 17 account, consistent with Cobell VI be done, determine whether 18 it is impossible for fulfillment. That is the key next issue. 19 And then to resolve that question, Your Honor -- 20 THE COURT: Let's assume it's impossible. 21 MR. AUSTIN: -- based on the facts. 22 THE COURT: You say it's impossible. So let's 23 assume it's impossible. Then what? 24 MR. AUSTIN: That's when the principles of equity 25 that exist and that have been utilizing in comparable HDC 43 1 situations are brought to bear. 2 THE COURT: Which are? 3 MR. AUSTIN: The principles are to be found in 4 leading treatises, the second restatement of trust -- 5 THE COURT: Counsel, just state them. 6 THE COURT: Don't tell us where they come from. 7 MR. AUSTIN: Okay. Well, let me do my best. 8 THE COURT: Tell us what they are. 9 MR. AUSTIN: And the reason I wanted to make that 10 clear, Judge Williams, is that there are any number of 11 principles that are brought to bear because equity, as this 12 Court knows, inherently flexible in about achieving justice, 13 but let me, let me provide the Court with a couple of 14 principles that would guide the District Court from this 15 point. 16 After obtaining additional facts, and confirming the 17 futility of this directed enterprise, then looking to 18 alternatives and pursuant to principles of equity, Judge, 19 looking to the information that exists, looking to the 20 principles that apply with respect to what's not available, 21 what we have here is as follows. 22 THE COURT: Counsel. Counsel. Stop for a second. 23 MR. AUSTIN: Yes, sir. 24 THE COURT: It is not unreasonable, for this Court 25 to ask, at this point, what specific remedy are you seeking if HDC 44 1 you're not seeking an accounting? 2 MR. AUSTIN: We are seeking an equitable remedy. 3 THE COURT: Careful, you're, it's -- 4 MR. AUSTIN: But we need the facts. 5 THE COURT: As I understand it you're not seeking a 6 gold plated accounting of the sword embodied in the structural 7 injunction. You may be seeking some kind of lesser wand. 8 MR. AUSTIN: We are seeking enforcement of the 9 obligation that the District Court was attempting to achieve 10 compliance with. But there have to be other mechanisms to 11 achieve that. 12 THE COURT: You always move to a higher level of 13 generality. We're trying to get you to a lower level of 14 generality. You can understand that. 15 THE COURT: What's the remedy? 16 MR. AUSTIN: The challenge for me, Your Honor, is 17 this. This information has come to light and I know the Court 18 has questioned the significance of the March 9th filings but 19 they included a statement in the motion filed by defendant's 20 counsel that spending all this money and doing all this work 21 would be of !"no value to class members." Now, I would submit 22 no one, to this point, has suggested, spend 13 billion dollars 23 and achieve no value but that is what the government is now 24 telling us. 25 THE COURT: The judge needs to have a sense -- HDC 45 1 THE COURT: Counsel. Counsel, aren't you ducking an 2 issue -- 3 MR. AUSTIN: Your Honor -- 4 THE COURT: -- that presents real jurisdictional 5 problems which is basically I'm getting the suspicion and what 6 you're going to ask for is money in lieu of accounting. 7 MR. AUSTIN: Your Honor, we're asking for -- 8 THE COURT: And that has a real problem in terms of 9 whether you're in the right court. Isn't that your 10 fundamental problem? 11 MR. AUSTIN: We're asking for an equitable remedy 12 and given that we're proceeding in equity -- 13 THE COURT: What is the equitable remedy? You want 14 to go shoot somebody, you want to put them in jail? What? Do 15 you want money? What is it that you want? 16 MR. AUSTIN: At this point, as I said, and I 17 apologize if I've not made this clear. You got to have the 18 facts to know what remedies are to be contemplated. 19 THE COURT: But now you've said you don't -- 20 MR. AUSTIN: So more facts need to be obtained. 21 THE COURT: -- want the gold-plated approach to 22 ascertaining the facts and I can't get from you a statement 23 whether, in the light of that, you want a sort of ordinary 24 iron and steel approach to getting the facts or no approach at 25 all. HDC 46 1 MR. AUSTIN: Even as I think this discussion we're 2 having confirms, you can direct, as Judge Lambert has done, 3 faithful to the mandates of this Court, that steps be taken to 4 rectify the long-standing breach of trust duty. You can spend 5 13 billion dollars, you can spend 10 times that amount, but if 6 the information is not there, if the records -- 7 THE COURT: Well, 13 billion was aimed at -- 8 MR. AUSTIN: -- have been despoiled for so long -- 9 THE COURT: -- generating information. 10 MR. AUSTIN: But the point is this, we don't 11 advocate and know that the district judge would not advocate 12 by imposing impossible remedy that winds up achieving no 13 justice. That is our concern. Our position is direct the 14 matter to the District Court. Let the additional facts 15 bearing on this issue be presented and then have the district 16 judge apply the principles of equity to what we do know and 17 determine what it is we don't know, and come up with an 18 appropriate resolution. Let me take a stab -- 19 THE COURT: In summary, except for wanting the 20 District Court to do it and to look at facts of a 21 classification of which you don't give us, you're unwilling to 22 state the nature of what you want. 23 MR. AUSTIN: Let me share with you what we said of 24 January of 2003 in our plan to the district judge, what we 25 advocated. Don't go forward with a structural injunction on HDC 47 1 our accounting plan because it's of no value. Look to other 2 ways. We advocate an equity based, for lack of a better term 3 rough justice approach. There is submitted in our August 4, 4 2003 proposed conclusions of law, that we submitted after the 5 1.5 trial had been completed and the part of (indiscernible) 6 defendants, we submitted three pages, page 8 to 10 of that 7 submission that described a series of cases where courts, most 8 of them state appellant, a few federal, were confronted with 9 this type of situation. For whatever reason, no information 10 to be used, in doing the accounting required by law. It is 11 difficult to summarize -- 12 JUDGE SILBERMAN: So what remedies did these 13 courts -- 14 MR. AUSTIN: This is what they did. They took the 15 information available, Judge, and they did the best they 16 could. And let me give you a scenario where that would be 17 applied here. The parties agreed, at least 13 billion dollars 18 had been paid into this trust. We regard that as a very 19 conservative estimate, but Mr. Casen's March 9 declaration 20 refers to that figure and let's take that for purposes of 21 discussion -- 22 THE COURT: I thought that 13 billion was the cost 23 not the amount of money. 24 MR. AUSTIN: No, the 13 billion dollars, Your Honor, 25 that has been agreed upon as having been put into this trust, HDC 48 1 in other words, money that went into the trust, that was 2 supposed to then be distributed to our clients, the 3 beneficiaries. That is an agreed upon sum. That is over the 4 history of the trust so we're talking about a sum of money 5 that would earn interest, that would yield other additional 6 value, but that's a starting point. 7 THE COURT: Is that gross or net? 8 MR. AUSTIN: That is the throughput amount. The 9 amount that went into the trust. How much went out, we'll 10 never know. 11 THE COURT: Well if 12 billion went out -- 12 MR. AUSTIN: That's the problem. 13 THE COURT: If 12 billion went out -- 14 MR. AUSTIN: No, that's what the government says. 15 They have no way of knowing. 16 THE COURT: -- the 13 billion is wholly irrelevant. 17 MR. AUSTIN: Your Honor, they have represented 12 18 billion went out. They have no way of knowing. 19 THE COURT: I don't know but -- 20 MR. AUSTIN: And where? 21 THE COURT: I have no idea what -- 22 MR. AUSTIN: Where? I know. 23 THE COURT: -- the facts are. 24 MR. AUSTIN: I have no idea. 25 THE COURT: But the 12 billion sounds, from your HDC 49 1 account, totally irrelevant. 2 MR. AUSTIN: Well, let me tell you the problem. You 3 said 12 billion went out. Maybe -- 4 THE COURT: I didn't say 12 billion went out. I 5 proposed a hypothetical. 6 MR. AUSTIN: But where did it go? 7 THE COURT: You really have to try to grasp that. 8 MR. AUSTIN: Okay, I'm sorry. 9 THE COURT: If 12 billion went out then the net is a 10 billion. Right? 11 MR. AUSTIN: But the problem is -- 12 THE COURT: You understand that. 13 MR. AUSTIN: -- we don't have the information. 14 There aren't the records available to know how much went out 15 and more importantly, to whom, where? Did our beneficiaries 16 in fact receive any of it. The problem is exacerbated by the 17 fact that the Department of the Treasury failed, until a few 18 years ago, to keep the checks that would be executed by the 19 beneficiaries and -- 20 THE COURT: Let me step back a moment. 21 MR. AUSTIN: -- so there's an absence of ecru. 22 THE COURT: Is it your current position that if it's 23 agreed and I don't know whether this is true that 13 billion 24 went in, at some point, to these trusts? 25 MR. AUSTIN: Yes. HDC 50 1 THE COURT: We have no idea how much went out to 2 beneficiaries? 3 JUDGE SILBERMAN: Well, the Government's position as 4 page 9361, that's Mr. Casen's affidavit, that's what you're 5 referring to, right? 6 MR. AUSTIN: Yes. 7 JUDGE SILBERMAN: That says, an estimated 13 billion 8 flowed in and about 12.6 has been distributed leaving an 9 overall balance of 416.2 million. 10 MR. AUSTIN: Right. 11 JUDGE SILBERMAN: That's the government's position. 12 Now I take it you disagree that the balance should still be 13 416 million? 14 MR. AUSTIN: Here's the problem. I don't, I don't 15 know about the current balance but the fundamental problem is 16 this. We don't know where the 12.6 billion dollars went -- 17 THE COURT: Yes. 18 MR. AUSTIN: -- or to whom. 19 THE COURT: But let me just -- 20 MR. AUSTIN: Yes. And there is no -- 21 THE COURT: -- finish. 22 MR. AUSTIN: -- information that can be looked to to 23 answer. 24 THE COURT: I want to get your answer to my 25 hypothetical and that is, we have a large sum of money going HDC 51 1 in. We have dispute as to how much went out and where it 2 went. Am I correct in understanding that your preferred 3 solution is that 13 billion be distributed to somebody without 4 further inquiry of any kind, either the sort of comparatively 5 cautious approach of the secretary, or the solid gold approach 6 of the district judge as to what has happened besides the 13 7 billion going in? 8 MR. AUSTIN: Let me take your hypothetical and I 9 have tried as best I can at this point to listen to the words. 10 THE COURT: Because you seem to be in the position 11 of -- 12 MR. AUSTIN: Yes. 13 THE COURT: -- repudiating not merely the incredibly 14 wasteful accounting, but even a sensible accounting. 15 MR. AUSTIN: And that is not our position or what I 16 should be conveying to the Court. In the situation you 17 described, Judge, in your hypothetical, we would submit, based 18 on what we currently know without the District Court looking 19 further into the matter developing additional competent 20 evidence on this subject, we would propose schedule the second 21 part of this bifurcated proceeding now. That is the phase two 22 that was supposed to have occurred years ago, that we were 23 told would occur by 2000 but has not yet been scheduled owing 24 to the problems reflected in the record. Schedule that 25 proceeding and say to the Government present your proof with HDC 52 1 respect to what you're able to show happened to the 13 billion 2 dollars. The government presents its proof insofar as it can 3 subtract from that sum, the resulting figure with imputed 4 interest and other yields that would be appropriate again as 5 determined by a court sitting in equity, get applied. Now 6 there may be other factors based upon the further fact finding 7 we believe the District Court should engage in, that bear on 8 what I just outlined and that's the problem and I -- 9 THE COURT: That does seem to take you pretty 10 straight to the jurisdictional problem that Judge Silberman 11 mentioned. 12 MR. AUSTIN: I don't believe that it does at all. A 13 court in equity can invoke a remedy that is about in part, 14 monetary reimbursement. We're talking about our clients 15 money. This is per the circuit rule in the Alaska Airlines 16 case, not a case of damages. We have made it clear from the 17 outset and the District Court has made it clear as well. This 18 is a suite in equity. We are not here, not in a position to 19 seek damages. But we can do what equity allows to get as much 20 of our clients property if it has to come back in money, then 21 that's how it must be, back. We are talking about a vested 22 property interest in the instrumental right that Judge 23 Williams, you described in Cobell XIII, was supposed to be the 24 key that could be used to tell our clients who had been in the 25 dark for 100 years, what the value of their rights is. How HDC 53 1 much are they entitled to get? Well, it would appear that 2 such a mess has been made of trust administration that they're 3 not going to get an answer to that question. Which they filed 4 a lawsuit to compel the answer to. So we look to other means 5 an-- 6 THE COURT: If I'm hearing you correctly -- 7 MR. AUSTIN: -- equity can produce. 8 THE COURT: If I'm hearing you correctly -- 9 MR. AUSTIN: Yes. 10 THE COURT: -- what you are asking is that an 11 effort, reasonable in relation to the sums apparently at 12 stake, you need to ascertain exactly, not exactly, you need to 13 ascertain how much should be in the accounts. That sounds to 14 me like a request for a reasonable accounting procedure, one 15 in which trade-offs are made between the desirability for 16 perfect accuracy and the real world. 17 MR. AUSTIN: Yes, and maybe just a -- 18 THE COURT: Could you say is that what you would 19 like? 20 MR. AUSTIN: No, I can't agree for this reason. And 21 I don't mean to be so difficult but it's so important that I 22 use my words correctly. An accounting is an understood term. 23 This Court recognized and delineated what that obligation 24 entailed. Going back to the beginning accounting for all 25 items and by that, every deposit, every withdrawal, every HDC 54 1 accrual, interest, that was the term accounting consistent 2 with trust law principles, was described as consisting of by 3 this Court four and a half years ago. So we're not seeking 4 since we say the accounting we're entitled to get and they're 5 advised by law to provide, we're saying we can't have that so 6 the Court is challenged exercising it's equitable authority to 7 come up with another fair way. A way that's fair to both 8 sides. 9 THE COURT: Bottom line is you want money in lieu of 10 your accounting? 11 MR. AUSTIN: Judge, I wish it were easy to say of 12 course that will take care of it. But the problem is this. 13 We have this purely instrumental right. I would say it's 14 invaluable. It's priceless. We have no idea. Our clients 15 have been kept in the dark for so long they don't know the 16 worth of that 17 THE COURT: So you don't want any money? 18 MR. AUSTIN: No, we want the Court -- 19 THE COURT: Right? 20 MR. AUSTIN: We want the Courts to do the best it 21 can -- 22 THE COURT: So you do want money or you don't want 23 money? 24 MR. AUSTIN: Your Honor, if that is the best remedy, 25 that a court sitting in equity can provide our clients. If 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 HDC 55 provided the information that they are entitled they can't be to THE MR. THE MR. outcome. COURT: AU ST IN: COURT: AU ST IN: You won't turn down the -- -- have -- You won't turn down the money? Your Honor, we want a just and fair Counsel, this is not a game. And Judge, perhaps -- My understanding is you want money in an accounting. Is that correct? It may be that's the best a court THE COURT: MR. AUSTIN: THE COURT: lieu of your right to MR. AUSTIN: sitting in equity can do. I will respond as Bill Austin, lawyer advocating plaintiffs. This is me talking, Your Honor, in response to your question. THE COURT: That's usually the way it works in appellant argument. MR. AUSTIN: It frustrates me. It saddens me as a citizen of this country -- THE COURT: It won't sadden you so much if you get money, right? MR. AUSTIN: -- with faith in our government, it distresses me, Your Honor. It distresses me that that may be the best that can be done in regard to this situation because if that's how it's resolved, I personally am convinced that HDC 56 1 whatever sum is selected by a court sitting in equity will be 2 woefully inadequate for this reason. It's not just that this 3 instrumental right is being deprived of us. It's that it also 4 takes from us any way of knowing what happened over the last 5 century, where the 40 million acres of land that have vanished 6 from the trust went to, who got enriched by that 7 disappearance, who are the trust beneficiaries anyway. The 8 problem is, Interior has stricken hundreds of thousands of 9 accounts, proposes that anyone who died over the last century 10 and was not alive as of October 25, 1994, you're out of luck. 11 THE COURT: Have you yet requested of the district 12 judge money in lieu of the accounting right? 13 MR. AUSTIN: Your Honor, we have requested that the 14 judge invoke equitable remedies. We presented in the phase 15 1.5 trial -- 16 THE COURT: Counsel. Counsel, I have tried equity 17 cases. Typically the plaintiff asks for a specific remedy. 18 MR. AUSTIN: We presented -- 19 THE COURT: They don't go in and give me whatever 20 relief you think might be appropriate. They ask the judge 21 specifically for a remedy. Have you indicated to the district 22 judge that you want money in lieu of your accounting? 23 MR. AUSTIN: Our position in the January 6, 2003 24 plan and the position presented at trial, was that there were 25 alternative means available of coming up with a just amount, a HDC 57 1 just sum. 2 THE COURT: Did you specify what those alternative 3 means, did you tell him, did you tell the district judge that 4 what you're seeking is as a remedy is money in lieu of the 5 accounting? Yay or nay? 6 MR. AUSTIN: We presented expert testimony in 7 support of an alternative approach but I need to make, 8 emphasize the following point and I don't think I've done a 9 good job at this point of doing this. What we want is a 10 correction of the accounts. That was the ultimate remedy that 11 we asked for nine years ago and that the bifurcated 12 proceedings -- 13 THE COURT: Yes, I understand but have you indicated 14 you wanted alternative remedy of money? 15 MR. AUSTIN: We wanted a sum that would represent a 16 fair and equitable correcting of the account balances. We 17 believe our clients are entitled and certainly the 1994 Act 18 reinforces this. Our clients are entitled to have trustee 19 delegates that put their house in order and can provide an 20 account. 21 THE COURT: The answer is yes, you've told the 22 district judge -- do I understand -- is it fair for me to draw 23 the conclusion from this dialogue that you told the district 24 judge you want money in lieu of the accounting? 25 MR. AUSTIN: What we told the district judge was 58 that looking backward in time, with respect to the historical accounting issues, that an alternative needed to be provided. !e did not take the position then, or today in front of this court that we are giving up a right to an accounting. As I stated earlier -- THE COURT: But you said -- MR. AUSTIN: -- it is an invaluable right going forward. THE COURT: -- you're, I why you're ducking this question. you're thinking of money? MR. AUSTIN: I'm not doing an effective job of presenting our position if I'm giving you the impression that I'm ducking the question. The problem is you've got the backward looking historical accounting issue. THE COURT: MR. AUSTIN: THE COURT: MR. AUSTIN: looking obligation. THE COURT: MR. AUSTIN: THE COURT: MR. AUSTIN: THE COURT: HDC 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 don't understand, Counsel, Is the alternative that Counsel, are you seeking -- And there's a -- Are you seeking -- -- there's a current and forward -- money in lieu of the accounting? With respect to -- Yes? With respect to the -- Counsel. HDC 59 1 MR. AUSTIN: Yes. 2 THE COURT: Are you seeking money in lieu of the 3 accounting, yes or no? 4 MR. AUSTIN: Your Honor, with respect to the 5 backward looking part, we are asking for a sum of money that 6 would represent an appropriate, applying equitable principles, 7 correction of the account balance, and that is what we are 8 seeking. 9 THE COURT: And do you have any theory as to have an 10 appropriate amount is to be calculated? 11 MR. AUSTIN: That's where the principles of equity 12 are brought to bear. 13 THE COURT: And how do those relate to the process 14 of an accounting? 15 MR. AUSTIN: Well, they take what information one 16 would like to have for accounting purposes -- 17 THE COURT: Well, they can't take what information 18 one would like to have. They can only take information that 19 somebody has. 20 MR. AUSTIN: You take what you have and then apply 21 trust principles and let me provide an example. 22 THE COURT: And so it's your position that the 23 amount of information currently in hand is sufficient? You 24 really can answer that question. Is the amount of information 25 currently in hand sufficient? HDC 60 1 MR. AUSTIN: I'll tell you why there needs to be 2 further proceedings. Because in the face of -- 3 THE COURT: I'm just talking about accounting 4 proceedings. 5 MR. AUSTIN: No, there needs to be the Government 6 showing what it's got, what information it has, and that is 7 such a significant question in our case, where it would appear 8 that there is no reliable trust information to be found 9 anywhere. That is a determination that would either be made 10 by the District Court further in the proceeding and in the 11 first instance. What can the government show us with respect 12 to where the money -- 13 THE COURT: In essence -- 14 MR. AUSTIN: --where the money has gone. 15 THE COURT: -- your answer is, you want, I don't 16 want to put words in your mouth. It's very hard. You want as 17 much effort in terms of additional or improved accounting as 18 is reasonable. Is that correct? 19 MR. AUSTIN: We want an improvement that is -- 20 THE COURT: Try answering yes or no and then the 21 explanation. Okay? 22 MR. AUSTIN: Yes, but with this explanation. We 23 want a correction of the account balances that is adequate in 24 view of the information available to make the determination. 25 Let me explain. The 13 billion dollar -- HDC 61 1 THE COURT: I think before you explain let's -- 2 MR. AUSTIN: Yes. 3 THE COURT: -- ask Judge Williams whether that was 4 the answer to the question he was asking? 5 JUDGE WILLIAMS: Well, I heard a yes and then a 6 further detail to follow. 7 THE COURT: The problem is we're way over your time 8 and if you're going to have any chance, if we're going to have 9 any chance to finish this this morning we're going to have to 10 shorten the explanations just a little. Could you try to do 11 that for us? 12 MR. AUSTIN: Certainly. Let me try in a nutshell to 13 set forth our position, because we really are confronted with 14 competing remand requests. The Government says we can take 15 care of it, give it back to us, they said that in Cobell XIII, 16 Cobell XII, Cobell VI. In fact, this Court has determined and 17 explicitly so, most recently in Cobell XII, that's not an 18 acceptable solution. Our hands aren't tied. The Court has an 19 obligation in fact, to do more than accept what's told when 20 what is being talked about and presented is inadequate to 21 satisfy the obligation. So the Government's position is not 22 acceptable. Remanding would condemn our clients to further 23 delay. 24 THE COURT: I thought you asked for a remand. 25 MR. AUSTIN: To additional (indiscernible) . We're HDC 62 1 asking for remand of an entirely different sort. 2 THE COURT: All right. Can I -- 3 MR. AUSTIN: The difference is night and day. 4 THE COURT: Let me ask a series of questions to see 5 if there's any common ground here at all. You heard, I saw 6 you sitting here for the previous case. A lot of discussion 7 about this Court's authority to issue advisory opinions. The 8 way we don't issue advisory opinions is by focusing on what we 9 have before us. What we have before us is a structural 10 injunction. Right? That's the only thing that's on appeal 11 here today, is a structural injunction ordering the Department 12 of the Interior to do something by various dates, correct? 13 MR. AUSTIN: Yes. 14 THE COURT: All right. You don't want that, right? 15 MR. AUSTIN: What we want instead -- 16 THE COURT: I don't want to know what you want 17 instead. I've heard what you want instead. 18 MR. AUSTIN: Okay. 19 THE COURT: I want to know. You do not want the 20 structural injunction that the Court entered. Is that right? 21 I see co-counsel nodding but you don't want that. 22 MR. AUSTIN: We are convinced that it would be a 23 futility, a monumental waste and would not achieve justice. 24 THE COURT: So you don't want it, right? It's not 25 the appropriate remedy here, right? HDC 63 1 MR. AUSTIN: Based on the information now available 2 we would agree. 3 THE COURT: Right and you, and you don't dispute, 4 perhaps because you have no way to value this yourselves, the 5 Government's estimate that it's going to cost 12 billion 6 dollars to do what the judge ordered them to do. 7 MR. AUSTIN: At this point, since the District Court 8 has not had a chance to examine the basis for the testaments, 9 I have no way of knowing. 10 THE COURT: So you have no way to dispute that. And 11 you sent us a letter which said, trustee delegates recognition 12 that this amount is inadequate, that is, the 58 million 13 dollars for the year, further demonstrates that the historical 14 accounting provisions are impossible of the structural 15 injunction are impossible of compliance. And you stand by 16 that position that you sent us in the letter, right? 17 MR. AUSTIN: Yes. 18 THE COURT: And in your brief you said that those 19 recent developments including the 13 billion dollar amount 20 meant that this injunction was impossible, right? 21 MR. AUSTIN: Yes. 22 THE COURT: Okay. So that means both sides agree 23 that this injunction should not stand. Correct? 24 MR. AUSTIN: Yes, and so the question becomes -- 25 THE COURT: Well, hold on. If I am the trustee, the HDC 64 1 settler or the beneficiary of $1000 account for my daughter 2 and I then go out and hire Goldman Sachs at a cost of 10 3 million dollars to administer that account, that would be 4 unreasonable, wouldn't it? 5 MR. AUSTIN: I am confident that a court sitting in 6 equity would never find that an appropriate solution. 7 THE COURT: All right. 8 MR. AUSTIN: And that is why our remand request has 9 been made. 10 THE COURT: All right. Now, why, let me ask two 11 more questions. The other things that you're talking about 12 here that you're discussing with each of my colleagues, those 13 are not before us in that the Judge has not ordered any of 14 those things, right? 15 MR. AUSTIN: Correct. 16 THE COURT: He hasn't ordered what you want and he 17 hasn't ordered what the Government wants, right? 18 MR. AUSTIN: Yes. 19 THE COURT: Okay. So, the remaining question is you 20 asked remand, they asked vacate. Why shouldn't we vacate 21 here? If both sides agree that this injunction should not 22 stand, either on the Government's side because they don't want 23 to spend the money in this way. They have another way of 24 doing it, or on your side because you don't want the money to 25 be spent in this way because you want the money to be HDC 65 1 available to your beneficiaries. It seems to me that you both 2 want vacation. Of course, we all want vacation. You know 3 what I mean here. We all want, that both of you want vacation 4 of this structural injunction, right? 5 MR. AUSTIN: But where the matter then goes and with 6 what instruction makes all the difference. 7 THE COURT: Now you're asking for a set of advisory 8 opinions. 9 MR. AUSTIN: No. 10 THE COURT: Now, we can discuss -- hold for one 11 second. 12 MR. AUSTIN: Okay. 13 THE COURT: You're asking what you want to add to 14 the vacation but you're not disputing that we should vacate 15 the structural injunction, are you? 16 MR. AUSTIN: What we proposed in our brief, we 17 believe this is the most efficient way or proceeding is hold 18 everything. Do and as the Court determined in connection with 19 the Ormont Drug case cited in our brief, do the following, 20 under your rule 41(b) authority, remand the record, keep the 21 injunction stayed in place, direct the District Court to 22 gather further information regarding the issue that is now 23 clearly front and center as our discussion -- 24 THE COURT: Okay, I understand that. 25 MR. AUSTIN: -- as our discussion this morning HDC 66 1 reflects. 2 THE COURT: Normally the way this Court works is 3 that we vacate unless we think there's a reasonable chance and 4 there's some debate about in the court overall how much of a 5 chance that the order itself will in the end stand. Right? 6 You don't think there's any chance, do you, that the 7 structural injunction given how much it's going to cost, will 8 in the end stand. Because you want that money spent for the 9 benefit of your, one way or the other, whether we call it 10 damages, whether we call it remedy, whether we call it 11 equitable, whether we do it in this Court, whether we do it 12 another Court. You don't want the Government to spend this 13 money on an accounting. On this structural accounting. 14 Right? 15 MR. AUSTIN: Correct. It is a futility. 16 THE COURT: All right, so then it seems to me that 17 it would be a mistake to remand without vacating this thing. 18 There doesn't seem to be any ground that either side has or 19 that either side desires for us to not vacate this injunction. 20 MR. AUSTIN: Well there is a choice for the court to 21 make but let me make the best argument that I know about in 22 support -- 23 THE COURT: Please, go ahead. 24 MR. AUSTIN: -- of what I proposed and what our 25 brief described. In the Ormond Drug case you had a contempt HDC 67 1 situation where the defense was, I don't have the money. My 2 lawyers and accountants won't do the work I've got to have 3 done in order to make the filing and hence what I've been 4 compelled to do and put in jail for not doing is impossible 5 fulfillment and this Court in Ormont Drug said hold 6 everything. Direct the district judge to consider the 7 question of whether it is impossible to comply with the order 8 that resulted in this person being held in contempt and that's 9 entirely consistent, of course, with equitable principles. 10 THE COURT: What's the cite for Ormond? 11 MR. AUSTIN: The cite is in our brief, Your Honor. 12 THE COURT: It is in the brief? 13 MR. AUSTIN: Yes. 14 THE COURT: Okay. Thank you. 15 MR. AUSTIN: Yes. 16 THE COURT: I have a question with respect to that. 17 MR. AUSTIN: Yes, sir. 18 THE COURT: My understanding is that your position 19 of impossibility and performance is based on the total cost, 20 is that correct? 21 MR. AUSTIN: There were other factors, Judge, 22 identified in our brief. 23 THE COURT: Yes, but the total cost -- 24 MR. AUSTIN: In addition to that. 25 THE COURT: -- is the key point, right? HDC 68 1 MR. AUSTIN: That is a very significant one when 2 we're told 13 billion dollars and no value whatsoever. 3 THE COURT: Okay, fair enough. 4 MR. AUSTIN: But there are others. 5 THE COURT: Now. This goes to the question of what 6 other, whether there are other issues before us. Are you now 7 taking the position that you're abandoning the request for an 8 accounting? 9 MR. AUSTIN: No. 10 THE COURT: So you still want an accounting? 11 MR. AUSTIN: What we seek is a fair and equitable 12 adjustment of account balances. 13 THE COURT: So therefore, it seems to me, am I wrong 14 in saying that the issues that the Government, specific issues 15 that the Government has identified as erroneous decisions or 16 orders in the District Court opinion are before us as well? 17 And you have argued to the contrary. The question, for 18 instance, whether statistical sampling is a legitimate basis 19 for doing any kind of accounting? 20 MR. AUSTIN: Right, and since the evidence -- 21 THE COURT: That's before us. 22 MR. AUSTIN: That's correct. 23 THE COURT: And we have to decide that. 24 MR. AUSTIN: As is the record. 25 THE COURT: And we have to decide that issue. HDC 69 1 MR. AUSTIN: Well -- 2 THE COURT: Even if we agree with you that the 3 overall burden of the injunction, structural injunction is too 4 high and therefore has to be vacated we still have to deal 5 with the specific issues. Because some kind of accounting is 6 going to be sought down below. 7 MR. AUSTIN: No, you don't. This, again, is about 8 the historical accounting obligation the Court is attempting 9 to enforce and it's about correcting account balances. Let me 10 explain. Depending on what -- 11 THE COURT: Can you hold? 12 MR. AUSTIN: -- the judge in the proceedings below 13 decides -- 14 THE COURT: I take it that if we -- 15 MR. AUSTIN: -- to do. 16 THE COURT: -- said this injunction can't stand 17 because the costs are way out of proportion to what's 18 available, we have no idea what the District Court might do in 19 the next, if the District Court then gives it another 20 accounting this court might well realize that statistical 21 sampling is the only way to provide an amount of money to do 22 it at a cost that's proportional. We might never have to 23 consider this question because the District Court might never 24 think it would be reasonable to eliminate sampling if the 25 District Court realized that it were limited by an amount of HDC 70 1 money. 2 MR. AUSTIN: The District Court devoted a 44 day 3 trial and the longest opinion issued by a district judge 4 sitting in this circuit, much of it to that issue. What the 5 district judge determined based on this exhaustive examination 6 of the proposal to use statistical sampling is as follows. 7 Number one, the defendants accountant admitted in the hearing 8 on November 25, 1998 -- 9 THE COURT: I think I read your briefs. We've all 10 read the briefs. 11 MR. AUSTIN: There's no evidence. 12 THE COURT: If the District Court, are you, perhaps 13 Judge Silberman is quite correct. Are you certain that the 14 judge will just go back and reissue an order saying that 15 sampling is inappropriate, even if we tell the judge that 16 there is a cap, a reasonableness cap on how much money the 17 cost can be. If your position is, is that it's clear, sort of 18 just like we had in the previous case, what Judge Bates would 19 do if we remanded, now the question is what would Judge 20 Lambert do if we remand. If your position is that there's no 21 question that we will again, a year from now, or three months 22 from now, be faced with a decision that says regardless of 23 cost, statistical sampling is not permissible then I think 24 Judge Silberman is correct. We have no question that we must 25 decide this. If your position is that you don't know what HDC 71 THE COURT: But I understand you to say, you reject don't you? Correct. Because it is not an an accounting. THE COURT: All right, so if it were the case, your position is even if a rejection of statistical sampling requires an expenditure of the entire gross national product of the United States, it still must be done? MR. AUSTIN: Your Honor, this is our position. THE COURT: s that your position? MR. AUSTIN: Let me try to -- I don't believe that it is, and let me explain. Our position is that there is no reason to address that or any other issues at this point. Remand the case to the District Court -- THE COURT: There's only -- MR. AUSTIN: -- to determine whether a completely different -- kind of (indiscernible) -- statistical sampling, MR. AUSTIN: accounting. THE COURT: MR. AUSTIN: that because -- THE COURT: MR. AUSTIN: You still reject it, don't you? And our position will not change on So if there's -- -- as a matter of fact in law it is not 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 I THE COURT: Let me turn over my cards. Can you hold HDC 72 1 for one second? 2 MR. AUSTIN: -- alternative is appropriate. Yes. 3 THE COURT: I agree with that unless you think your 4 position is always going to be that. That no matter what the 5 facts show statistical sampling can never be permitted. If 6 that's your position then there's no reason to resolve that. 7 Just hold for one second. 8 MR. AUSTIN: Yes. 9 THE COURT: You understand? 10 MR. AUSTIN: Yes. 11 THE COURT: If your position is that regardless of 12 the facts, statistical sampling is always prohibited, then of 13 course, we're going to face that question again. Now, is that 14 your position? 15 MR. AUSTIN: The Court may not have to. 16 THE COURT: Why not? 17 MR. AUSTIN: Depending upon subsequent developments. 18 If the Court below decides that an accounting is a futility 19 and that an alternative approach should be used -- 20 THE COURT: But you're going to -- 21 MR. AUSTIN: -- this issue is gone. There is no 22 further reason -- 23 THE COURT: Excuse me but you are going to staunchly 24 argue that in trying to figure out how much should be given to 25 who, no statistical sampling should be employed. Is that HDC 73 1 correct? 2 MR. AUSTIN: It's because -- 3 THE COURT: I see you nodding your head 4 affirmatively. Is that correct? 5 MR. AUSTIN: Your Honor, statistical sampling does 6 not comply with this Court's -- 7 THE COURT: Your answer is? 8 MR. AUSTIN: -- guidance in Cobell VI. 9 THE COURT: Your answer is that in no way may a 10 statistical sampling be employed to get the remedy you 11 require. Is that correct? 12 MR. AUSTIN: Correct. 13 THE COURT: Correct. 14 MR. AUSTIN: Based upon this Court's guidance and 15 the evidence presented. 16 THE COURT: In Corbell VI. 17 THE COURT: I understand exactly where your position 18 is. You have in mind an ideal accounting system. And you 19 can't get that because of the limitation of cost. Ergo the 20 value of that ideal accounting system should be relevant in 21 determining what the appropriate equitable remedy is. Isn't 22 that your position? 23 MR. AUSTIN: No. What we had in mind is what this 24 Court identified and delineated in Cobell VI. That's an 25 adequate accounting -- HDC 74 1 THE COURT: No but I -- 2 MR. AUSTIN: -- a full and complete accounting of 3 all items. 4 THE COURT: That may have been a friendly question 5 to you. 6 MR. AUSTIN: I know but I need to be sure that I am 7 as clear as I can be. 8 THE COURT: But if I understand here. 9 MR. AUSTIN: That is what we have in mind. 10 THE COURT: Let me see if I understand your 11 position. Ideally, if you could have it you would have an 12 ideal accounting system. 13 MR. AUSTIN: An adequate and fully complete 14 accounting as the law required. 15 THE COURT: Yes, it would be your adequate and fully 16 but there's a limitation of cost here. So therefore you ought 17 to be compensated for the failure to get the adequate 18 accounting system. 19 MR. AUSTIN: If it were just an issue of cost, with 20 all the information that's there, if the light could be shone 21 into this darkness and our client be given the information 22 they're entitled to get, we would be advocating till the cows 23 come home. Cost, as this Court recognized in Cobell VI, cost 24 should not be the tail that wags this dog. That would be our 25 position but that's not the situation we're confronted with. HDC 75 1 The cost reflects, Your Honor, the cost reflects the fact that 2 this is a futility. You can pick any number. What it's about 3 is we can't do it. 4 THE COURT: But it's still relevant to the district 5 judge in your view as to what the adequate accounting 6 framework should be. 7 MR. AUSTIN: If the district judge on remand is 8 provided with the following information that this Court now 9 has, 1.) 12 to 13 billion dollars or maybe more; 2.) No value 10 to the class. The district judge applying what this Court has 11 provided in terms of guidance, may well arrive at an entirely 12 different approach based on principles of equity then has been 13 expressed to this point. 14 THE COURT: And as I understand it you do think that 15 this structural injunction is of no value to the class, and 16 you don't dispute within some order of magnitude, the cost, 17 right? 18 MR. AUSTIN: Your Honor, my problem with agreeing 19 with that question is this. 20 THE COURT: That's the way you put it. You said if 21 the judge were persuaded that this injunction was not of value 22 to the class and that the cost was $12 billion, the judge 23 wouldn't do. He wouldn't just reorder this injunction and it 24 would be wrong to do that, right? You said that. 25 MR. AUSTIN: We would urge the Court, given those HDC 76 1 facts to look to another way to make the proper adjustment of 2 the account balances. The accounting obligation that exists, 3 that is reflected in the 1994 format, going forward we would 4 expect to be satisfied. We would urge that these defendants 5 get their house in order to provide our clients with what the 6 law required. But that is, it is important that I make that 7 distinction. 8 THE COURT: We understand. I think we have your 9 position. Are there any questions? Thank you very much, we 10 appreciate it. 11 MR. AUSTIN: Thank you. 12 THE COURT: You're way out of time on rebuttal. On 13 the other hand they were way out of time on response so I'll 14 give you a little more time. 15 ORAL ARGUMENT OF MARK B. STERN, ESQ. 16 ON BEHALF OF THE APPELLANT 17 MR. STERN: Thank you, Your Honor. If I could just 18 begin by giving a couple of joint appendix cites that I think 19 are relevant. The cost, the estimate of the cost of the 20 structural injunction was not only, of course, provided by 21 Congress and cited in this Court's 2004 opinion would hardly 22 have been news to the District Court, was also contained in 23 the affidavit of Mr. Casen. It's in the joint appendix at 759. 24 THE COURT: What date was that presented? 25 MR. STERN: That's 2000 and -- HDC 77 1 THE COURT: No, what date was that presented to the 2 district judge? Is that before he issued the structural 3 injunction? 4 MR. STERN: It was after he issued the original 5 structural injunction at the time when we were seeking a stay 6 but it was obviously before -- 7 THE COURT: Did he still have jurisdiction? 8 MR. STERN: Whether he did then or not -- 9 THE COURT: You're talking about the original? 10 MR. STERN: That's the original. This is a 11 declaration (indiscernible) in 2003. 12 THE COURT: So this was something that was in the 13 court file when after our most recent Cobell decision went 14 back to the District Court and he -- 15 MR. STERN: Yes. It was sitting there. And it's 16 not as though, I mean, I'm just saying even technically, the 17 declaration was in there. But of course, everyone knew, I 18 mean, nobody knew what the cost was after this Court's last 19 opinion and what Congress said you know, would have been out 20 of the question anyway. 21 THE COURT: Did District Court hold hearing before 22 reinstating the structural injunction after our -- 23 MR. STERN: No, the Court, no. 24 THE COURT: Wait, let me get the sentence out. 25 MR. STERN: Sorry. HDC 78 1 THE COURT: That's all right. We issued our 2 decision in Cobell I guess 10, 11, 12, 13, right? And after 3 we issued that the District Court reinstated the structural 4 injunction when the appropriations act ran out, right? 5 MR. STERN: Yes. 6 THE COURT: Between those times, did the District 7 Court hold a hearing on the question of whether he should re- 8 institute the structural injunction? 9 MR. STERN: No. 10 THE COURT: Did you seek one or did you know -- 11 MR. STERN: It was done sua sponte. 12 THE COURT: So you had no idea it was coming. 13 MR. STERN: No, it was done sua sponte and in the 14 Court simultaneously denied the stay pending appeal so the 15 Court was very firm in its views. 16 THE COURT: What is your response to the suggestion 17 that our presiding judge makes -- 18 THE COURT: Only by implication. 19 THE COURT: -- that if we vacate we shouldn't reach 20 any of the specific issues you raise on appeal with respect to 21 alleged legal errors in the structural injunction. 22 MR. STERN: Your Honor, if it weren't bad form I 23 would get down on my knees and ask you to address those 24 issues. 25 THE COURT: No, but counsel -- HDC 79 1 THE COURT: It's bad form. 2 THE COURT: Counsel, you know what, well, it is bad 3 form and we don't respond to emotion as you noticed. Do you 4 have a logical answer? 5 MR. STERN: Yes, I do have a logical and it's that 6 at this point the District Court has said these are the 7 parameters, legal parameters. This is part of an injunction. 8 THE COURT: Right but do you think if we were to 9 decide the more cosmic question which is that both sides agree 10 that a structural injunction can't be issued without looking 11 at the cost, and if we were to say that it would be 12 unreasonable because the only costs in the record are so much 13 higher than any benefit to the beneficiaries, do we know that 14 the District Court would then reissue an injunction with the 15 same provisions irregardless? 16 MR. STERN: Well, I know that this Court has twice, 17 for example, on statistical sampling said you should be 18 allowed to do it. It said that in 240 F.3d. It said it at 19 392 F.3d. 20 THE COURT: Because that's just futile, whatever we 21 do. 22 MR. STERN: Well, that as you know, is our position. 23 And the, and all we're asking is that the Court has to be 24 specific enough to allow this process to go forward in the way 25 that, if the Court agrees with us. If it doesn't, no, but if HDC 80 1 the Court agrees with us -- 2 THE COURT: If it doesn't, you want us to be specfic 3 too? 4 MR. STERN: Yes, I would. I'd rather know the worst 5 so that we can think about what to do so Congress can take 6 action. But this death by 1000 cuts of going back down, 7 having things reinstituted, we need to have the guidance so 8 that we can at least go back and do the real accounting and 9 the answer is of course plaintiff's don't want a sort of 10 strapped down sort of accounting of the kind that we are 11 proposing. 12 THE COURT: If the premise is that any accounting to 13 take place should be constrained by a.) availability of funds 14 and b.) reasonableness principles, who should, what 15 institution should in the first instance decide how to make 16 the trade-offs necessary for reconciling optimality in 17 accounting with these constraints? 18 MR. STERN: I think the, that it sort of roughly -- 19 THE COURT: I mean -- 20 MR. STERN: But it's roughly -- 21 THE COURT: There are two possible answers. The 22 Court and the branch of government charged by Congress with 23 running the trust -- 24 MR. STERN: Well, I think that -- I put first I put 25 Congress itself in which I do think has made -- You want us to remand to Congress? Is is? THE COURT: MR. STERN: THE COURT: the APA we don't have MR. STERN: comes first. THE COURT: that what your theory MR. STERN: We think that Congress has made judgements. Then the agency makes judgements and then on review if the review who is active in a final agency action. If the agency has failed to comply with substantive law, whatever the source of that law is, then the Court can declare the error. THE COURT: And the answer to my question is, that in the first instance it is the department that should propose what should happen next? MR. STERN: Yes, Your Honor, but if the department has to go back down and this Court has never addressed the legal underpinnings of this structural injunction, we're talking about the beginning of my opening, then the department will be operating under a cloud, whatever it decides to do, when it gets back to the District Court, this Court will never have vacated, well it vacated but it will have never said those were mistaken. HDC 81 Yes. -- judgments. We don't have the authority. Even under that authority. No, we believe that Congress' authority 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 HDC 82 1 THE COURT: Counsel. Counsel. All these kinds of 2 operational and pragmatic concerns are very, may be beside the 3 point. Shouldn't your argument be there are certain legal 4 rulings that the District Court made with respect to the 5 structural injunction regardless of whether or not the overall 6 injunction is impossible to perform we are entitled to review 7 those specific legal decisions he made? 8 MR. STERN: Absolutely. 9 THE COURT: And not make this argument about that 10 you need to get down on your knees and you're having trouble 11 and so forth. 12 MR. STERN: It's just an expression of emotion, Your 13 Honor. 14 THE COURT: That's the response to the question of 15 whether it would be an advisory opinion -- 16 MR. STERN: Right. 17 THE COURT: -- to go beyond the vacate. 18 MR. STERN: There is nothing advisory about 19 reviewing the underpinnings -- 20 THE COURT: Again we have Article 3 advisory -- 21 MR. STERN: -- of a ruling. 22 THE COURT: -- and we have the colloquial meaning of 23 advisory. 24 MR. STERN: I'm sorry, Your Honor, because of this, 25 I can't hear. HDC 83 1 THE COURT: I can't hear anything either. 2 THE COURT: Will you turn that thing off? 3 THE COURT: It's not within her authority either. 4 THE COURT: Why doesn't the presiding judge do that? 5 THE COURT: Someone forgot to tell me how to get 6 that authority. (indiscernible) a problem of a first time. 7 Again, I think there's no question that we have Article 3 8 authority to decide this question. The issue is is this, are 9 these a series of sort of fact specific decisions that we 10 might not have to decide, that are difficult and that might 11 not recur if we were to tell the District Court that it is 12 constrained by cost? 13 MR. STERN: Well, I don't think first of all the 14 District Court, I mean, you've got the, it can't, there is a 15 relationship between costs and what Congress has either 16 authorized or required and that's why while I agree the 17 principles of equity would preclude this that we believe that 18 when Congress authorizes it is really relevant and that it is 19 not an advisory opinion in a revealing a structural injunction 20 to say that this is afoul of what Congress has authorized. 21 THE COURT: But all we know that Congress has 22 authorized specifically is this 58 million for one year. 23 MR. STERN: I know. 24 THE COURT: If you want to go back to Congress and 25 have Congress say only spend this amount of money. It seems HDC 84 1 clear that the other side it would not contend that that 2 wasn't the limit. 3 MR. STERN: Your Honor, it's the other side that's 4 relying on that 58 million dollar appropriation. We come to 5 you saying Congress passed a statute, there are words to that 6 statute. There was a legislative history to that statute. It 7 should be informed by notions of rationality -- 8 THE COURT: but all the things that you're saying 9 about that could be agreed on both sides. That is, just hold 10 for one second, that words that are in the legislative history 11 are all about the need to be proportional between cost and 12 benefit. And that's not, I don't see exactly how that's 13 distinct from the equitable principles. 14 MR. STERN: Your Honor, that part that I was 15 prematurely objecting to is the notion that there was an 16 agreement on this. Plaintiff's position, and I'll be clear 17 about what it is and I would just prefer the Court very 18 quickly to Plaintiff's plan that they submitted which is 19 particularly a JA-1050 through 66. And also their most recent 20 submission at the time we were putting together this appendix, 21 which is at 9405 through 07, a heading entitled 22 !"Disgorgement," which normally sounds like a request for 23 money, which we would believe should -- if that's what this 24 has really come down and we think that it has come down to 25 this, this should now be in the Court of Federal Claims. And HDC 85 1 that's really what Plaintiff's want. 2 Plaintiff's don't want some version of an accounting 3 based on any form of rationality and if you read Mr. Austin's 4 transcript carefully, you will see that he never, ever, ever 5 went so far as to say anything different. He was very careful 6 about that because what Plaintiff's believe is that this Court 7 had said that we are entitled to an accounting of the order 8 that the District Court required and they will continue to 9 believe that and what they think is that because an account, 10 because the accounting that Congress actually wanted to have 11 cannot be done for reasons of costs and other reasons, that 12 the District Court should instead formulate a model in which, 13 specifically, 13 billion dollars, the amount of the throughput 14 are put into a fund and then it becomes the Government's 15 burden to demonstrate. This is all laid out in Plaintiff's 16 plan. If I'm getting any detailing incorrectly, it becomes 17 the Government's burden to demonstrate that all disbursements 18 were made correctly as if the Government had sort of been 19 found guilty of all manner of trust, you know, like defaults 20 throughout history so that then there will be money passed 21 over. 22 THE COURT: Money passed over being the difference 23 between what the Government can prove was dispersed and what 24 the Government cannot prove was disbursed. 25 MR. STERN: That's exactly right. And again I ask HDC 86 1 the Court -- 2 THE COURT: And the balance then would be dealt with 3 by the !"equitable remedy of disgorgement." 4 MR. STERN: Exactly. And that's in Plaintiff's 5 plans and statements. I'm not asking the Court, obviously, to 6 take my word for it. They're saying that fine, you don't any 7 longer want an accounting. Back early on the Government moved 8 to dismiss this case saying this should be in the Court of 9 Federal Claims. The District Court said I'm not going to do 10 that because Plaintiff's aren't seeking a cash infusion. They 11 say all the money that's there should already be there. All 12 right. Fine. So we never appealed that point. However, what 13 is now happened is that we are, the ideas of an accounting, by 14 the Plaintiff's, they don't really want, they use the word 15 accounting, but what they really want at this point is what 16 they've been proposing since 2003. And whether or not that, 17 they're entitled to any of that, that's a question for another 18 Court altogether. That doesn't belong in this Court at all 19 and what we're saying is if you really want -- 20 THE COURT: Even as to that question we don't have 21 briefing on whether disgorgement is something that the 22 District Court has authority -- 23 MR. STERN: No. 24 THE COURT: -- for or not, right? 25 MR. STERN: No. But what we do believe is that what HDC 87 1 we've asked is that this Court correct the legal errors 2 because what Plaintiff's, the reason Plaintiff's don't want 3 you to vacate the injunction and address the points, the legal 4 points is that they want to say the D.C. circuit once again 5 didn't address various points. So really this is all still up 6 for grabs and look how much it would have caused and what 7 we're asking for and they never said this really isn't what 8 you were required with any specificity. They just said 9 something about it's too expensive. They never said anything 10 further so now let's proceed along this route. And what we're 11 saying is no, please reach to the legal premises of the very 12 order that's on their review and address them. That's not an 13 advisory opinion. 14 And then allow the agency as this Court contemplated 15 in 2002 to go back and do it. And that's not an advisory 16 request either. We want a real remand, back to the agency. 17 Not round 16 so that we'll be here again in, we're going to be 18 here again in another month but it's like -- 19 THE COURT: I'm sorry, you want a remand to the 20 agency for what? 21 MR. STERN: A remand to the agency to finish the 22 historical accounting. 23 THE COURT: You're really asking for restoration of 24 the status quo anti the so-called structural injunction? 25 MR. STERN: What we're really asking for, that's HDC 88 1 almost right, Your Honor, we were really asking for a status 2 quo anti the 2002 contempt ruling which formally terminated 3 the remand to the agency. 4 THE COURT: Okay. Okay. I see. 5 MR. STERN: What we're saying is you, in 2001, said 6 the remand to the agency, you know, you said a lot of harsh 7 things about the agency but you said nevertheless it's the 8 agency's job and they should be discretion. By the end of 9 that year, the District Court had already said use of 10 sampling, clearly contemptuous. The following year it says 11 you're an unfit trustee, I'm terminating the remand. And 12 that's where we've been since then. 13 THE COURT: See, it worked. Thank you. Case is 14 submitted. 15 MR. STERN: Thank you so much. 16 (Recess.) 17 18 19 20 21 22 23 24 25 HDC 89 CERTIFICATE I certify that the foregoing is a correct transcription of the electronic sound recording of the proceedings in the above-entitled matter. ___________________________________ 9-30-05 Heather Caban Date DEPOSITION SERVICES, INC.