IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ) ELOUISE PEPION COBELL et al...=., ) ) No. 1:96CV01285 Plaintiffs, ) (Judge Lamberth) V. ) ) GALE A. NORTON, Secretary of ) tile Interior. et al.. ) ) Defendants. ) .) INTERIOR DEFENDANTS' SUPPLEMENTAL OPPOSITION TO PLAINTIFFS' MOTION FOR A PRELIMINARY INJUNCTION REGARDING HISTORICAL STATEMENTS OF ACCOUNT Pursuant to the November 1, 2002 Order of the Court, tile Secretao, of the Interior and the Assistant Secretary, - hldian Affairs ("Interior Defendants," or "Interior") respectfully submit the following supplemental opposition to Plaintiffs' Motion for a Preliminary Injunction ("Preliminary Injunction Motion"). Tile Preliminary Injunction IVlotion should be denied. INTRODUCTION Interior has prepared historical statements of account for certain Individual Indian Money ("IIM") judgment account holders, and Interior believes that it is obligated to send them to the account holders as part of Interior's trust responsibility. On September 20, 2002, Plaintiffs filed the Prelimina_ Injunction Motion to prevent the statements from being sent to the I125/I account holders. Interior filed an opposition to the Preliminary Injunction Motion on September 23, 2002. On October 9, 2002 and October 28, 2002, Interior mailed a total offapproximately 1,200 historical statements of account to the parent or guardian of tile account holder for whom they were prepared. On November 1, 2002 the Court heard arguments on the Preliminary Injunction Motion. I The Court indicated at the hearing that it is not troubled by the transmission of the statements themselves. November 1,2002 Transcript ("Tr.") at 16, 19, 33, 34. The Court expressed concern, however, about the in formation accompanying the statements which informed the account holders that Interior had an administrative process in place to handle questions about the statements and that under this process any challenges to the historical statements of account must be made within 60 days or the opl, ortunity to appeal would be lost. Id.__. at 16, 33. At the hearing, thc Court directed the parties to file supplemental briefing regarding the propriety ofhlterior's communication with class members when it mailed the historical stalements of account. As discussed below, Interior's communication was appropriate and may have been required. I. INTERIOR'S COMMUNICATION WITH CLASS MEMBERS IN SENDING THE HISTORICAL STATEMENTS OF ACCOUNT WAS APPROPRIATE The defendants in this case have an ongoing relationship with class members due to Interior's trust responsibilities to the IIM account holders and as part of Interior's numerous other statutory responsibilities. A necessary part of that relationship involves communication with class members. Interior has not violated any order of the Court prohibiting communication with class members, and the Court has indicated that ordinary course of business communications, including even the historical statements of account themselves, are not prohibited. Tr. at 16, 19, 34. The Court has expressed concern about the information in the transmittal letter infon-ning the The Court also heard argument on Interior's Motion for an Order Permitting Interior to Send the Statements to Plaintiffs' Counsel and on Plaintiffs' Motion for a TemporaD' Restraining Order. By Order of November 1,2002 the Court gq-anted Interior's Motion and denied, as moot, Plaintiffs' TRO Motion. 2 account holders of the existing administrative proccss that governs challenges they may have to the historical statements of account. But that information was not false or misleading. Indeed, to omit such information while transmitting the statements could have been misleading because the recipient may not have known about the Interior administrative process. Interior's communication was thus proper, and may have been necessary. A. No Prior Restraint on Communication Was in Place The Court has the authority under Fed. R. Civ. P. 23 to enter an order restricting communication with class members, but only after a hearing to develop a record establishing why such an order is needed (o protect the class from undue interference and false or misleading statements. See GulfOil Co. v. Bernard, 452 U.S. 89 (1981). 2 This Court has not issued such an order. By Order of February 4, 1997, the Court certified the class, but did not prohibit communication in that order and has not prohibited communication in any subsequent order or required that any communication be approved first by the Court? In addition, no local rule, g' Courts routinely refuse to impose limitations on conmmnications unless based on a clear record showing the need. See, e.g., Williams v. Chartwell Fin. Se_'s., Ltd., 204 F.3d 748, 759 (7th Cir. 2000); Great Rivers Coop. v. Farmland hldus., 59 F. 3d 764, 766 (8th Cir. 1995). 3./ Interior, and Interior's counsel, have previously requested Court approval of certain proposed communications with class members. See Interior's Emergency Motion For Entry of All Order Clarifying Ethical Obligations of Attorneys Regarding Public Administrative Process, filed December 11, 2001 ("December 11 Motion"); and Interior's Motion For Entry of An Order Regarding A Public Administrative Process To Implement The American Indian Trust Fund Management Reform Act of 1994, filed March 1, 2000 ("March 1 Motion"). Those prior motions made clear that interior did not believe prior approval of the Court was necessary, but was only sought in the circumstances of those proposed communications out of"an abundance of caution." December 11 Motion at 3; March 1 Motion at 3. Moreover, the communications involved in those motions were different from the communication involved here where Interior believes it is required to transmit the historical statements of account to the account holders for whom they were prepared. The focus of the earlier motions was on the appropriateness of attorney participation in the proposed communications. Ill the Order of December 12, 2001, 3 statute or other regulation imposes a blanket prohibition on communication between lntcrior and the class member account holders. h_deed, where a class action defendant has an ongoing business relationship with class members, as is the case here, ordinary course of business comnmnications, unrelated to the litigation, are clearly not prohibitcd. See, e.g., Great Rivers Coop., 59 F.3d at 766; Rankin v. Board of Educ., 174 F.R.D. 695, 697 (D. Kan. 1997); Resn/ck v. American Dcntal Ass'n, 95 F.R.D. 372, 377 (N.D. Ill. 1982); see generally Manual for Complex Litigation (Third), ¢30.24, at 234 (1995); Newberg on Class Actions, § 15.14 (3d ed. 1992). The unique difficulty in this case is that given the nature of Plaintiffs' claims related to accountings and gcncral trust reform, coupled with the wide scope of Interior's statutorily mandated responsibilities to class members, virtually any comrnunication could be described as "rclated to the litigation." In a similar context, a district court in New Mexico recognized that Interior's status as a government entity, with responsibilities to scribe class members, distinguished it from the usual situation regarding contact with class members. Ramah Navajo Chapter v. Babbitt, No. Civ. 90- 0957, Mem. Op. at 5 (D.N.M. filed Aug. 3, 1999) ("[I]t is clear that the Assistant Secretary's unique role and his relationship with the tribal entities which make up the class are sufficient to distinguish the authority the Class cites") (opinion attached as Exhibit 1). Absent the ability to communicate with class members without prior approval of the Court, Interior would simply be unable to perform its statuto_ duties. Indeed, perhaps recognizing the nature of the relationship between class members and granting the December 11 Mbtion, the Court did impose conditional restrictions on the participation of certain identified attorneys in the proposed communication. 4 Interior, tile Court has indicated that the provision of quarterly statemcnts of account and even the historical statements of account at issue here are not improper communications. Tr. at 16, 33. So the only issue remaining for resolution by the Court is whether there was anything in the transmittal letters accompanying the historical statements of account, and informillg the recipients about Interior's administrative procedures for resolving disputes about the historical statements of account, that was somehow improper or otherwise required prior approval of the Court/ Interior believes that the communication was appropriate. B. Communication Reoardin.o Administrative Procedure Was Not False Or Misleadine A primary concern rkgarding communication with class members is that the communication should not be false or misleading. Tile Supreme Court recognized that "[u]napproved communicati_Ons to class members that misrepresent tile status or effect of the pending action also have an Obvious potential for confusion and/or adversely affecting the administration of justice." GulfOil, 452 U.S. at 101 n. 12. Courts are concerned about defendants soliciting class members to opt-out of the class based on false and misleading statements. See, e.g., Kleiner v. First Nat'l Bank, 751 F.2d 1193 (1 lth Cir. 1985); Jcnnifer v. Delaware Solid Waste Auth., No. 98-220, 1999 WL 117762, at *'3-5 (D. Del. Feb. 25, 1999). In Faucett v. American I'eleph0ne & Telegraph Co., No. 81-1804, 1985 WL 25746 (D.D.C. Oct. 4./ It should be notcd that communications with account holders whose accounts were created after February' 4, 1997, when the class was certified for "present and former beneficiaries of Individual Indian Money accounts," Certification Order at 2-3, are obviously not connmmications with class members unless these account holders also had other IIM accounts created before February 4, 1997. All of the historical statements of accounts sent thus far were sent to account holders whose jud_mnent accounts were created after February 4, 1997, but Interior has not yet verified whether these account holders also had other accounts created before February 4, 1997. 5 18, 1985), the court found that statements provided to class members materially misrepresented plaintiff's claims and, therefore, could be enjoined. tlere, no one can claim that the information provided in the transmittal letters about tile administrative procedure adopted by Interior for application to disputes about the historical statements of account is false or misleading. The inforlnation in the transmittal letters accurately describes the nature of the administrative process that is in place. Plaintiffs, before they had even seen thc historical statements of account, charged that they were false or misleading. But, again, the issue for decision here is ;lot whether the statements themselves might contain inaccurate information, hldccd, the whole point of the administrative procedure is to obtain information the recipient may have about any inaccuracies and hopefully resolve any dispute before it goes to the Court. So the focus must be on whether the information about the administrative procedure supplied to the account holder is untruthful or misleading. Much of the administrative process applicable to the historical statements of account was already in place to handle appeals from other t_es of decisions by Bureau of Indian Affairs ("BiA") officials. See generally 43 C.F.R., Part 4. The Federal Register Notice of September 6, 2002, merely gave notice that the procedures already in place would apply to OH/A decisions. See Notice of Review of Historical Trust Accounting, 67 Fed. Reg. 57,122 (September 6, 2002) (attached as Exhibit 1 to Plaintiffs' Reply to Interior's Opposition to Plaintiffs' TRO Motion)? The Federal Register notice and the regulations published in the C.F.R. may not have described all aspects of the administrative procedure governing these historical statements of account. However, the applicable process was adopted by the agency before the statements went out. The communication to the account holders merely advised them of an existing agency procedure mid gave appropriate warning of the possible consequences of inaction. 6 No one has suggested that/nterior lacks authority to set up an administrative procedure for review of accounting appeals and to require exhaustion of administrative remedies. 6 The Court's expressed concern seemed to be only about how Interior communicates information about thc administrative procedure to class members. ? C. Silence About The Administratix'e Procedure Could Have Been Misleadinl? If it was proper for Interior to mail out the historical statements of account - and the Court has indicated that it was - and if the administrative procedure itself is not at issue, then not only was it permissible for Interior to inform the account holders about the procedure, but Interior may have been required to give them thc infonnation when h_terior sent out the statements. Omitting a description of the administrative procedure adopted by Interior could _3' .Any challenge to the administrative procedure itself- as opposed to communications with class members about thc procedure - is not properly before the Court. The issue is not the subject of the Preliminary Injunction Motion, which is limited to Plaintiffs' attempt to prohibit transmittal of the statements to account holders. Plaintiffs have not amended, or sought to amend, their complaint to add an attack on Interior's administrative powers. And, most importantly, the issue is not ripe yet for the Court to hear. No account holder has yet had any purported rights extinguished by the 60-day rule or any other aspect of the administrative procedure. If that happens, then and only then, would the issue be ripe for the Court to hear. Interior, of course, does not concede that a challenge would then be appropriate or that the Court would have jurisdiction to challenge the routine administrativc process adopted by Interior. Interior only acknowledges that it would then be ripe for review. The Court also expressed some concern about the ethical obligations of attorneys in regard to communications by their client with class members. Tr. at 7. Interior is unaware of any ethical rule that requires counsel to instruct a client to restrict its communications where the proposed communications themselves are not improper. As described in the text, the communications here were entirely appropriate. D.C. Rule of Prof. Conduct 4.2(a) obviously prohibits direct, or indirect, communication between counsel and a represented party, but as describcd previously, provision of the historical statements of account was a communication by Interior to the account holders and was not a communication initiated by, or on behalf of, counsel. Counsel gave advice to ensure compliance with this Court's orders, but such advice does not violate Rule 4.2 or any other applicable rule of professional conduct. 7 have misled the recipient into believing that the process did not apply to the historical statements of account. The account holder might not have realized that inaction would have precluded a challenge to thc statements. Under these circumstances, Interior properly decided to include notice of'the administrative procedure in the transmittal letter. II. INTERIOR IS WILLING TO ADD LANGUAGE NOTIFYING ACCOUNT HOLDERS OF THE CLASS ACTION IF DESIRED BY THE COURT Interior bclieves that its communication with the account holders regarding the historical statements of account and the applicable administrative process was appropriate. It is not aware of any requirement that such a communication include notice of this case, but is willing to add such a notice to fi_ture statcments and to provide it to the account holders who have already received statements, if such notice is desired by the Court. A. No Requirement That Class Members Be Notified Of The Pendency ora Class Action As discussed above, nothing in the language informing the account holders of their administrative rights and obligations regarding the historical statements of account was untruthful or misleading. The historical statements of account and the accompanying transmittal letter did not mention this action or the existence of class counsel. Interior does not believe, however, that anything in the Court's prior orders, statutory authority or other !aw required Interior to notify the account holders of this case or to inform them that they were members ora class, represented by class counsel. In hct, it may have been misleading to include language about the case in the historical statements of account, ha Rankin, 174 F.R.D. 695, the plaintiff class was composed of students receiving speech and language sen'ices. Defendant school district sent noticcs to the parents 8 acknowledging a claim contained ill the complaint that certain services had not been provided and stating that compensatory services would be provided. The letter did not mention thc class action. The court found that the letter, even if it discussed matters that were the subject of the litigation, was not an abusive practice. The letter did not refcrence the litigation and did not "attempt to seek to discourage or prevent the recipients of the letter from participating in the lawsuit." Id....=. at 697. The court recognized that it would "be difficult, if not impossible, for the defendants to continue to provide sen, ices if all communications had to be made through counsel." Id__=. Moreover, the court prohibited the defendant from making any "contact or communication with [potential class members] which expressly refers to tiffs litigation." Id._.= The court permitted ordinary course of business communications, "even though such communications may necessarily implicate the subject matter of the litigation." Id__:. Similarly, here, if hlterior had included a reference to this case in the historical statements of account or in any way had attempted to describe the nature of the claims in this case, it might have misled the recipient. Interior did not "attcmpt to seek to discourage or prevent the recipients of the letter from participating in the lawsuit." Rankin, 174 F.R.D. at 697. Omitting notification of this case was not improper under the circumstances of this case. B. If Desired, Notification Language Can Be Added The current form of the historical statements of account and the accompanying transn'fittal letter is appropriate. To allay any concerns by the Court, however, Interior is willing to add a notification about the case in the transmittal letters to class members and send out a similar notice to any class member who has already received a statement, along with notice that the 60- day period for challenging the statement does not begin to run until the date the supplemental notice is sentfi hlterior is even willing to use a larger, bolded typeface to convey such a notification. Plaintiffs' counsel may not w'ant such a noticc to be included, cspecially since after entry of the Court's November 1,2002 order, Interior is now attthorized to send them copies of the historical statements of account. Plaintiffs' counsel have already received copies of the statements that have gone out and will get copies of the future statements, and counsel can communicate with these class members as desired. However, if the Court considers it appropriate, h_terior will send an amended notice to prior class member recipients of historical statements of account and will include the language in future transmittals to class members. CONCLUSION For these reasons, and for the reasons discussed in Interior's Opposition to the TRO Motion filed on Septembcr 23, 2002, Plaintiffs' Preliminary Injunction Motion should be denied. Dated: November 15, 2002 Respectfully submitted, ROBERT D. McCALLUM, JR. Assistant Attorney General STUART E. SCHIFFER Deputy Assistant Attorney General J. CHRISTOPHER KOHN Director gANDRA P_ " Deputy Director D.C. Bar No. 261495 The notice can read: The account holder is a member of a class action, Cobell v. Norton, No. 1:96CV01285, (D.D.C.). Class members are represented by counsel who can be contacted at [address/phone number/web address]. 10 JOHN T. STEMPLEWICZ Senior Trial Attorney CSqqTHIA L. ALEXANDER PHILLIP M. SELIGMAN Commercial Litigation Branch Civil Division P.O. Box 875 Ben Frmlklin Station Washington, D.C. 20044-0875 (202) 514-7194 11 CERTIFICATE OF SERVICE 1 declare undcr penalty of perjury that, on November 15, 2002 I served the foregoing Interior Defendants' Supplemental Opposition to Plailltiff_' Motion for a Prelimhm O, bTjunction Regarding Historical Statemelzts of Account by facsimile ill accordance with their written request of October 31, 2001 upon: Keith Harper, Esq. Dennis M Gmgold, Esq. Native American Rights Fund Mark Kester Brown, Esq. 1712 N Street, N.W. 1275 Pennsyh,ania Avenue, N.W. Washington, D.C. 20036-2976 Ninth Floor (202) 822-0068 Washington, D.C. 20004 (202) 318-2372 By U.S. Mail upon: Elliott Lev/tas, Esq. 1100 Peachtree Street, Suite 2800 Atlanta, GA 30309-4530 By facsimile and U.S. Mail upon: Alan L. Balaran, Esq. Special Master 1717 Pennsylvania Avenue, N.W. 12th Floor Washington, D.C. 20006 (202) 986-8477 Joseph S. Kieffer, HI Special Master Monitor 420 7 th Street, N.W. Apartment 705 Washington, D.C. 20004 (202) 478-1958 Kevin P. Kingston _-