UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT ELOUISE PEPION COBELL, et al., Appellants/Appellees, v. Nos. 08-5500 & 08-5506 KENNETH LEE SALAZAR, SECRETARY OF THE INTERIOR, et al., Appellees/Appellants. Monday, May 11, 2009 Washington, D.C. The above-entitled matter came on for oral argument pursuant to notice. BEFORE: CHIEF JUDGE SENTELLE, CIRCUIT JUDGE GINSBURG, AND SENIOR CIRCUIT JUDGE RANDOLPH APPEARANCES: ON BEHALF OF THE APPELLANTS/APPELLEES: DENNIS M. GINGOLD, ESQ. ON BEHALF OF THE APPELLEES/APPELLANTS: ALISA B. KLEIN, ESQ. ON BEHALF OF THE INTERVENOR: MERRILL C. GODFREY, ESQ. Deposition Services, Inc. 6245 Executive Boulevard Rockville, MD 20852 Tel: (301) 881-3344 Fax: (301) 881-3338 info@DepositionServices.com www.DepositionServices.com C O N T E N T S 2 ORAL ARGUMENT OF: PAGE Dennis M. Gingold, Esq. On Behalf of the Appellants/Appellees Alisa B. Klein, Esq. On Behalf of the Appellees/Appellants Merrill C. Godfrey, Esq. On Behalf of the Intervenor 3; 43 22 37 PROCEEDINGS THE CLERK: Case number 08-5500, et al., Elouise Pepion Cobell, et al., Appellants versus Kenneth Lee Salazar, Secretary of the Interior, et al. Mr. Gingold for the Appellants/Appellees; Ms. Klein for Appellees/Appellants; and Mr. Godfrey for the Intervenor. ORAL ARGUMENT OF DENNIS M. GINGOLD, ESQ. ON BEHALF OF THE APPELLANTS/APPELLEES MR. GINGOLD: May it please the Court. JUDGE SENTELLE: Good morning, Counsel. MR. GINGOLD: Good morning, Your Honor. This matter is before this Court on a 1292B appeal. We raise legal issues that we challenged for which we -­ THE COURT: The only order that's subject to the 1292B is the order for the monetary judgment -­ MR. GINGOLD: Yes, Your Honor. THE COURT: --not the previous one dealing with the adequacy of the historic account. MR. GINGOLD: I believe that's Cobell XX, I think that's -­ THE COURT: Is that right? MR. GINGOLD: I believe that's correct, Your Honor. But we did petition this Court for review under 1292B with respect to Cobell XXI. I believe Judge Robertson included Cobell XX when he identified issues of appeal, or areas for appeal. THE COURT: He only identified three issues. MR. GINGOLD: Yes. THE COURT: Two are yours -­ MR. GINGOLD: That's correct, Your Honor. THE COURT: --because the monetary judgment was not high enough, I mean, it was under that, right? And then the other was the Government's claim that there was no jurisdiction to issue the monetary judgment. That's the only three issues that Judge Robertson identified, right? MR. GINGOLD: My recollection is a little different, Your Honor. My -­ THE COURT: Well -­ MR. GINGOLD: --recollection is that the Judge certified the issues that we raised for appeal, and that the Government didn't ask for any of its issues to be certified, and the issues that we raised for appeal were interest, whether or not interest is recoverable under Bowen as specific relief for restitution, whether or not the court applied the presumptions that we believe are required to be applied under the rules of this court, and whether or not the funds that the court held are found to be Individual Indian Trust Funds are not recoverable in this litigation if they've been held in an account that is not identified as an Individual Indian Trust Account. THE COURT: Yes, you're right. Actually, there are four, the --he says the question whether he had jurisdiction to order discouragement, right? MR. GINGOLD: That's correct. THE COURT: Application of super strong presumption that you invoke; third was the third driver the dollar amount --well, actually three --was (indiscernible 11:19:27) funds, right? MR. GINGOLD: (No audible response.) THE COURT: And then the Government is jurisdiction. MR. GINGOLD: That's correct. But I believe the question you asked, Your Honor, was which issues were certified by the district court. And I believe the -­ THE COURT: Well, the statute talks about issues, but the Supreme Court has held that the certification is of the order, and I asked you which order, there are two orders here. MR. GINGOLD: It was my understanding that the judge included Cobell XX, as well as Cobell XXI within this. But it -­ THE COURT: You said the opinion, you mentioned the earlier opinion, but I don't know that he certified the order. MR. GINGOLD: I understand, Your Honor. THE COURT: Okay. MR. GINGOLD: In that regard, if I may, the first issue that we raised in this appeal is whether or not as a matter of law our clients are entitled to interest, if interest is specifically identified by statute in the first instance, and whether or not that interest should be retroactive based on the express provision in section 4012 of the Trust Reform Act of 1994, as applying solely to Individual Indian Trust beneficiaries. The second issue we raised was with regard to presumptions, and these are presumptions, inferences, ambiguities, and how the rules apply to a trustee when a trustee has failed to render an accounting, or has failed to maintain accurate books and records. And the last issue is whether or not Individual Indian Trust Funds, as we understand it, lose their character as trust funds simply because they're not held in an account that is not identified as Individual Indian Trust Funds. Osage Individual Indian Trust Funds are the biggest example. There are many other examples in this action, including the funds held in special deposit accounts, that this Court dealt with in Cobell VI, including the funds dealt that are held in per capita in judgment accounts, including the funds that are held in the Treasury General Account that are not identified as Individual Indian Trust Funds, and including funds that have been held in commercial banks in the name of the secretary, superintendent -­ THE COURT: Pardon. MR. GINGOLD: In the name of the secretary, superintendents, Indian agents. And of course, the last portion of it, which is the most difficult, are funds that were used by the Government to purchase certificates of deposits, or government securities, whether they're Liberty bonds, savings bonds, war stamps, or other types of instruments, and those investments were made either in their instruments, or in the name of the secretary, or the superintendent, or the Indian agents. So, that is what the third component encompasses with Osage as being an important element of it. With respect to interests, we are very well aware of the rulings of this Court, and this Court has addressed many of the interest obligations, statutes, the no-interest rule, and the presumption against the waiver of sovereign immunity with regard to interest. We are very well aware of that. We believe under Bowen where there is a specific statutory obligation to pay interest independent of a trust that that statutory obligation is considered under Bowen as an obligation that is enforceable, and in accordance with section 702, sovereign immunity has been waived. To the extent sovereign immunity needs to be waived. THE COURT: You took that issue out of this case right from the beginning. How many times have we issued opinions in this case, nine, 10? I don't know. MR. GINGOLD: Nine opinions, that's correct, Your Honor. THE COURT: Nine opinions, and if the question, or if it appeared that your complaint was seeking money then I don't know what would have happened, but the one thing that is absolutely clear is that at least early on, back in, you know, Cobell I, or Cobell II, this Court would have either by adversary proceeding, but among the parties that were sua sponte decided whether we have jurisdiction over that claim. And here now, now we're in Cobell X, or whatever, and we've had nine opinions issued without, on the basis that there was no monetary judgment, no monetary claim involved, we've had them all issued, and now suddenly we're confronted with a jurisdictional question. JUDGE SENTELLE: It'd be Cobell XXII if you count both courts. MR. GINGOLD: That's correct, Your Honor. THE COURT: So, what's your answer to that? MR. GINGOLD: Our answer is my understanding of the facts is a bit different, Your Honor. And if I may? THE COURT: Yes. MR. GINGOLD: This issue was raised repeatedly at the beginning of the litigation. It was not a secret issue. The Government contested vigorously whether or not depending on the results of the accounting Plaintiffs would be entitled to recover in the district court. The issue was briefed, was debated, and it was included in Cobell V. That is a decision which led to the appeal for which this Court made a determination on February 23rd, 2001. In the December 21, 1999 opinion in Cobell V, Judge Lamberth (phonetic sp.) expressly addressed the issue then that was raised by the Government precisely as Judge Randolph has discussed it now. And as Judge Lamberth explained in his decision, and the Government did not appeal that in Cobell VI, by the way, what he explained was this, he explained the difference between damages remedy, and an equitable remedy that includes restitution and specific relief. He explicitly described what his understanding of the scope of Bowen is, and he explained that incidental to any accounting would likely be a monetary award in accordance with Bowen, or in accordance with restitution, which he specifically stated, citing Bowen and cases in this circuit, that the type of award we are talking about is restitution, it's equity, it's not damages, and it's within the jurisdiction of the district court. THE COURT: Whatever label you put on it the district court, Judge Lamberth, said that you on behalf of your client, he said disavowed any claim for cash infusions into the IIM accounts. MR. GINGOLD: That's correct, Your Honor. We are not asking for -­ THE COURT: Would this judgment be a cash infusion into the IIM accounts? The answer is yes. MR. GINGOLD: With all due respect, again, that very issue was raised by Judge Lamberth during oral argument, and a proceeding in that court back in I believe it was 1998. And in that regard it was pointed out we're not asking for money that hasn't been collected. We're not asking for money. THE COURT: This is the proceeding in which you said that all the money that's there is already in the accounts? MR. GINGOLD: Well, no. We said all the money there was collected and held by the Government, it wasn't identified to the accounts as it should have been, which is the purpose of an accounting and reconciliation, to determine whether or not money is put in the wrong drawer is the question. The money has been collected. Whether or not the money was never collected is the point we're making, Your Honor. We specifically disavowed damages in this litigation. We recognized the district court does not have jurisdiction. THE COURT: Well, you didn't put it in terms of damages, you put in the term of cash infusion into the IIM accounts, which is why I think, why I want to get away from the label, is it damages, is it restitution? It's cash, right? MR. GINGOLD: No. Your Honor, it's my understanding is again a bit different. When we're dealing with the funds in the treasury we're not dealing with cash, we're dealing with credits and debits. There is no cash. And that was explained again during testimony from treasury witnesses I think during the -­ THE COURT: What would your clients collect --by the way, this is a little bit off, but how does the --let's assume the judgment stands, the $400-some million, how does the district judge go about deciding who gets what? MR. GINGOLD: Your Honor, again, our understanding is we're dealing with restitution and specific relief. It is irrelevant to the harm sustained by an individual. THE COURT: No, but you have how many individuals are potentially -­ MR. GINGOLD: Your Honor --I'm sorry. THE COURT: How many individuals potentially receive this part of this judgment? MR. GINGOLD: That's one of the problems in this litigation, Your Honor. And by the way, Judge Robertson specifically reserved these issues for discussion and to address subsequent to this appeal. But if I may I will address it anyway. THE COURT: Let me tell you why I'm asking. MR. GINGOLD: Okay. THE COURT: One of the things that occurred, and the parties --this is an interlocutory appeal, which we have discretion to take or not take, but one of the things that occurred to me is that in deciding among all the individual claimants how much of the $488 million they're going to get you have to do some sort of accounting. There's no way that claimant one gets 10 bucks, and claimant two gets 50 cents. You've got to make a decision about each individual, and so you wind up doing the very accounting, at least partially, that Judge Robertson said is -­ JUDGE SENTELLE: You can't get. THE COURT: --impossible. MR. GINGOLD: Your Honor, one of the reasons that restitution is employed as opposed to a damages remedy where we could disagree, but if you may indulge me just -­ THE COURT: Yes, go ahead. MR. GINGOLD: --a little bit. One of the reasons that restitution is employed in circumstances such as these where you're dealing with a trustee who has records, supposed to have records, supposed to maintain records, doesn't maintain records, is that the beneficiaries don't have the ability to be able to identify the amount of money, or the issues related to the undisbursed funds that is their's. We're dealing with a class in this case as a --where the funds are commingled when they're collected, the funds are commingled when they're deposited, and the funds are commingled when they're invested in various instruments. Unless you are able to identify whose funds, from which lands, from which leases were put in which pool, which were invested in which securities, it is utterly impossible to make any distinction between any individuals' claims. Your Honor, one of the problems in this litigation is that Treasury actually testified in response to Plaintiffs' request for production of information on the securities that were purchased, and redeemed, if they could identify the securities that were purchased at any point in the trust with individual (indiscernible 11:31:36) trust funds, the answer is we can't do it. And the reason they said they can't do it is because they were dependent entirely on predicate information from the Department of Interior that did not provide that information to Treasury. For several years in this litigation that was one of the debates that was going on. Consequently, we're --one other factor, and this is an important one, they sent a class certification based on our understanding of Cobell VI, which we believe is controlling law, the accounting should go back to the date of the earliest deposit, so opening balances can be determined in order to come to a conclusion with regard to current balances. Your Honor, based on the record of these proceedings, and exhibits provided by the Government, from 1985 to I believe 2001, 265,000 accounts were closed, they were closed for a variety of reasons. We don't know which accounts were closed, we don't know whose accounts were closed. We do know, for example, that this Court has said that each individual who has a stake in the land should have an account. That's precisely what the first special trustee said. One of our main plaintiffs, Mr. Molson (phonetic sp.), doesn't have an account, he has trust land, his parents have trust land, his grandparents have trust land. They're dealing with timberlands. It is difficult to answer the question, Judge Randolph, as to how much money any individual should receive as a result of a class conclusion unless we know how many individuals there are. We know there were 550,000 accounts through 1985. We don't know how many accounts existed prior to 1985. As a matter of fact, what Judge Robertson said was absolutely correct, the Government has not even in earnest attempted to assess what is necessary for an accounting in the pre-1985 period, the first 100 years of this trust. So, Your Honor, we agree with what you are thinking. Therefore, the only way to provide for a class resolution (indiscernible 11:34:10) is on a per capita basis. It's rough justice, some people are not going to be receiving the money that should reflect the benefit that was conferred on the Government, but if you don't have the records, and the Government hasn't even begun to look for the records, and has disavowed any intention to do an asset assessment, the lands, the subsurface rights, the securities that were purchased, Your Honor, the subsurface rights are more complicated than the land itself, and those rights sometimes are separated from the land, sometimes they're reserved in the land when the land is sold. None of this has been done. So, Your Honor, we have the same concerns that you do with regard to a specific allocation. JUDGE SENTELLE: This is possibly -­ MR. GINGOLD: As a matter of fact -­ JUDGE SENTELLE: --not our issue, but I think it goes back to what Judge Randolph started from, can that be done, is it possible, or is that within the realm of impossibility that the district court was talking about? MR. GINGOLD: Your Honor, as I understand the law, rough justice is something that is done in circumstances like this. Unless something like this is done we will not only be in court another 13 years, this case will never be resolved. JUDGE SENTELLE: Has it only been 13 years, this case has been going on? MR. GINGOLD: It's only been 13 years, Your Honor. Some of us didn't have gray hair when this started. We all do now if we still have -­ THE COURT: Some of us had hair. MR. GINGOLD: Well, Your Honor, you're absolutely right. And the court, this Court is properly concerned about it. We've been concerned about it, as well. And therefore we believe there's ample precedent in this circuit, and at the Supreme Court for rough justice in circumstances such as this. And indeed when you -­ THE COURT: What's rough justice? MR. GINGOLD: Rough justice is something that's fair, and we believe would be a per capita distribution. If you are able -­ THE COURT: Is it possible for one individual to have more than one account? MR. GINGOLD: You're absolutely --it's possible for more than one individual to have more than one account. THE COURT: Yes. Would you distribute on the basis of the number of accounts an individual has, or on the basis of just the individual? MR. GINGOLD: In my view -­ THE COURT: Each person would get what by your estimate? About less than $1,000. MR. GINGOLD: In my view each person should receive money, whether he had one account, no accounts, or 10 accounts. Because as this Court stated each individual should have had an account, and that's what the special trustee stated. So, the real question is for --is to identify the Individual Indian Trust Beneficiaries, those who owned the land. And Your Honor, you asked probably the most critical question that we've been debating in the 13 years of this case, not only is that what we've discussed a problem, but the UBSG, or the (indiscernible 11:37:06) issue complicates it even further. Through year end 1999 as a result of legislation that twice has been deemed unconstitutional by the United States Supreme Court, 775,000 undivided interests held by Individual Indian Trust Beneficiaries were permitted by the Department of Interior to (indiscernible 11:37:32) to the tribes for nothing. Twice it was held unconstitutional. We don't know how many more of (indiscernible 11:37:40) in the last 10 years. We do know based on testimony in this litigation that the Government hasn't done anything about the 775,000 (indiscernible 11:37:51). Those are land interests, undivided interests that can produce income, where's the land, where's the income? Nobody knows. Nobody has even identified the trust beneficiaries whose lands (indiscernible 11:38:05), Your Honor. That's another further question, and Your Honor, the Government has not even attempted to do anything about that. So, what we're left with is this, where you have a trustee who doesn't keep adequate records, who doesn't maintain adequate systems, who doesn't comply with orders, whether it's orders of this Court or anyone else, and Your Honor Cobell VI in our view is controlling law in this case. The question is can a trustee escape accountability under those circumstances? If that's the case, Your Honor, and this Court has enormous discretion in equity to do what it believes is best, but if that's the case, Your Honor, it would change 115 years of precedent in this circuit. And we're dealing with precedent from the 1995 through 1946 to 1961 to 1981 concluding in Rainbolt with Judge Skelly-Wright (phonetic sp.) in that opinion with regard to what the obligations are, and what happens when the information is provided, and what happens when the presumptions are applied. And it's stated from 1895 to the present in this circuit. JUDGE GINSBURG: Mr. Gingold, notwithstanding everything you've said this morning, the district judge in the final footnote said he didn't reach his conclusion in this case based on an adequate accounting being impossible because of missing records, but rather --as to which he thought the record was inconclusive, but rather on the ground that the expense of doing an adequate accounting just was inconsistent with congressional appropriations for this purpose. Now, that seems to put everything we've been discussing today, and I know you were responding to our questions, to one side if that isn't the ground of the decision. And my first question, therefore, or my question is what do we do first with the actual ground of decision? MR. GINGOLD: Thank you, Your Honor, I was trying to address -­ JUDGE GINSBURG: Sure. MR. GINGOLD: --Judge Randolph's question. JUDGE GINSBURG: Yes. MR. GINGOLD: And that's an important point you're raising. Cobell VI identified an important factor, because this issue was raised 10 years ago, this isn't the first time the issue was raised, 10 years ago the Government explained, as a matter of fact on September 5th, 2000 before this Court the oral argument occurred with Justice Department and Plaintiff's counsel, and this Court asked some of the very same -­ JUDGE SENTELLE: Move to what was said, Counsel, we don't need to hear any more history. MR. GINGOLD: Okay. JUDGE SENTELLE: Move along. MR. GINGOLD: Your Honor, cost is not a factor. This Court held in Cobell VI that neither the sufficiency of resources, nor the administrative complexities are satisfactory to either delay or excuse the accounting obligation. And the reason given by this Court was that the Government as trustee has been well aware of its obligations since before the Trust Reform Act, and to use that as an excuse now isn't appropriate. Further, and this maybe the most -­ JUDGE SENTELLE: That did not, however, deal with precisely the question today where the judge is finding from the legislative enactments that Congress must not have intended that full of an accounting given the fact that they did not appropriate consistent with that interpretation of the statute, would you speak specifically to that? MR. GINGOLD: Yes. What I -­ JUDGE SENTELLE: That issue didn't exist at the time of Cobell VI, what I think Judge Ginsburg is asking about. MR. GINGOLD: I think what the judge, what Judge Robertson is referring to was based on what had been done to date, or to date of that decision, based on what needed to be done that hadn't even been started, and based on the costs that were estimated, it would take --and the absence of appropriations if in fact the appropriations remained constant, it would basically be more than 100 years before the accounting would be completed. I think that's what he's referring to. JUDGE GINSBURG: The 100 years isn't in the opinion, is it? MR. GINGOLD: No, I think he discussed that in court, Your Honor. JUDGE GINSBURG: Okay. How do you reconcile this with the Mashpay (phonetic sp.) decision? MR. GINGOLD: There are a couple of different -­first of all, Your Honor, we are dealing with a trust, we're dealing with a trust obligation; we're dealing with an obligation by statute that's been codified since 1898; we're dealing with the consequences of not providing an accounting, and the consequences in the context of Mashpay or in Henkels v. Sutherland, or in the 1932 controller decision, if you have a trust, and the trust --you have the trust funds it is an obligation to restore to the trust beneficiaries all funds and income generated therefrom, all or you will have a confiscation that would have constitutional concerns. Your Honor, it is simply not a good excuse to say we don't have the money to account for your funds. If that's the case, Your Honor, there is no trust. The fundamental --what this Court said in Cobell VI and has been restated, has been stated by the Supreme Court, and most recently before Cobell VI there was (indiscernible 11:43:42) Apache, and before that it was Mitchell II. Inherent in the trust itself is a duty to account. If the duty to account is excused based on insufficient funds or administrative complexities caused solely by the trustee we don't have a trust here, Your Honor. And if we don't have a trust here we either have a confiscation that would be endorsed, and we have something even more critical than that, what is the legal authority for the United States to hold our clients' assets and trust money. Fifty-four million acres or so at the beginning of the trust -­ JUDGE SENTELLE: Yes. I think you've probably finished responding to Judge Ginsburg and started talking on your own again, and your time is actually up. So, unless my colleagues do have further questions we'll hear from the Government. MR. GINGOLD: Your Honor, may I have rebuttal time? JUDGE SENTELLE: Beg your pardon? MR. GINGOLD: Rebuttal time, would that be available? JUDGE SENTELLE: We will see if we give you back a couple of minutes for rebuttal. MR. GINGOLD: Thank you, Your Honor. JUDGE SENTELLE: Thank you, Counsel. We are likely to, I would put it that way. We'll hear from Ms. Klein. ORAL ARGUMENT OF ALISA B. KLEIN, ESQ. ON BEHALF OF THE APPELLEES/APPELLANTS MS. KLEIN: May it please the Court, Alisa Klein for the Government. I appreciate I am here to answer the Court's questions about the orders on review, but if I may ask the Court's indulgence just for two minutes, I just would like to explain what we know today as a result of the hundreds of millions of dollars that have been spent on historical accounting activities -­ JUDGE SENTELLE: All right. Very soon get to Judge Randolph's original question. MS. KLEIN: Yes. I appreciate that I need to address the procedural history. But I just want to clear something up, because there's a difference between what was known in 1994 when Congress passed the legislation, and also what was known in 2001 when this Court heard the first appeal, and what's known today now that a lot of work has been done. Back in 1994, I promise I'll be brief, but back in 1994 there was a lot of uncertainty because of the way trust records had been kept over time, which was in a totally decentralized fashion, paper ledger era, back, you know, individual field offices would keep the money, keep track of the money by individual account, money in, money out, money in, money out, but these were scattered throughout the country. Even in the electronic era, which was 1985 to 2000, you had decentralized databases, and so what we couldn't do was guarantee or give assurance that the current balances were correct back in 1994 because we had not yet amassed the documents, and had not yet analyzed them. The purpose of this project, the historical accounting project, was to gain some competence in what had been done over time. And that's why we have gathered 43 miles of documents, and centralized them at that facility in Lenexa, Kansas, and that's why we've had five accounting firms and two historian firms going through them for all of these years. And what we now know is that in --I'm not saying we know this 100 percent, but from everything we've seen we know that the BIA offices did exactly what would have been required of any private fiduciary, they kept individual books for each account, money in, money out, these were mostly pass through accounts, so the money would come in, and then it would be paid by check to the account holder generally over night. So, there were a lot of small transactions. We know these books were kept, and we know that they were made available upon request. We cite the old policy, and Plaintiffs witness acknowledging that they were made available upon request, that is the fiduciary duty to account. It's accounting, it's keeping the books, and producing them at reasonable times upon request, and that was done. This project --we didn't know that back in 1994, we now know that. This project has gone further, and it's essentially done an audit, again, not 100 percent because no one would pay for that, and it would take 200 years, but there's been all of this additional work to see how well were those records kept. If you trace it back to the original lease does the money make sense, was it distributed correctly? And the results are described in the 2007 plan, and we've reproduced the underlying reports, the (indiscernible 11:47:59) reports that summarize all of these findings, and what we found again they were kept remarkably well, not perfectly, of course there were errors. JUDGE SENTELLE: Yes. You're using time on adverbs and adjectives when you've already gone about three minutes without getting to the questions that Judge Randolph raised which are essential. MS. KLEIN: Yes. I understand it, but this case -­ JUDGE SENTELLE: Okay. Well, make it plain that you understand it -­ MS. KLEIN: I understand, but -­ JUDGE SENTELLE: --by finishing that up without any adjectives or adverbs, and then getting to the Court's question. MS. KLEIN: Okay. But I'm just very concerned that this case not be propelled by a myth. JUDGE SENTELLE: Move along, Counsel. MS. KLEIN: Yes. Yes, Your Honor. Because both the money claims, and the assumption that accounting is impossible, everything rests on this myth that has been dispelled by the work that's actually been done. Judge Randolph, your procedural question, here's what happened, the impossibility ruling was the reason for the money trial, explicitly. It was the district court because it believed that Congress had required a multi-billion dollar accounting project that at the current appropriation level would take hundreds of years, the district court concluded that would be irrationally expensive and take too long. So, the district court said I will therefore devise an alternative remedy, and that was the money trial, and because the district court thought we can't analyze individual accounts, it decided to focus on what it called aggregate level through put, throws through put. And we have all of our objections to that, but just procedurally, and then at the end of that the Court issued a money award. And the Plaintiffs came in and asked the district court to, actually, what they asked for was a 54(b) certification. And the district court said parties, I want briefs in three days on whether I can do a 54(b) certification. We came in and said no, there's not jurisdiction to do 54(b), and we said if you're considering 12(d) 92(b) certification, please give us time to go to the Solicitor General to get authorization to formulate our own questions, and the district court declined to do that. But the order that it certified, it said I am issuing -­it issued a new order, declaratory judgment, the class is entitled to $455.6 million for the reasons stated in the impossibility and restitution rulings. So, both of those rulings --that's just the reasoning, everything is here that is, it's not even antecedent, it is the reason. THE COURT: You can argue that it's a preliminary question to the award of the, you know -­ MS. KLEIN: And -­ THE COURT: --I -­ MS. KLEIN: But also that Judge Robertson meant it to be. He explicitly said the order I am certifying is this $455.6 million for the reasons that necessarily start with impossibility. THE COURT: But in his memorandum accompanying that he didn't mention the, didn't even mention this impossibility rule. MS. KLEIN: Well -­ THE COURT: He mentioned four questions, and not one of the dealt with the previous rule. MS. KLEIN: Yes. But again, I mean, we had not briefed this because we needed Solicitor General authorization and there was no time, there was just a matter of days. And so, from our perspective this was essentially a sua sponte certification. But we nonetheless, we didn't just do a cross- appeal, we filed a timely 1292(b) petition in which we raised all of these issues, and we explained that we didn't think their appeal by itself would have met the standards for 1292(b), but since our appeal has the potential both to eliminate the need for any distribution proceedings, which would necessarily be very complex, but also to end the case, that's why we said to the panel that, you know, was going to hear the 1292(b) issue, that's why this satisfies the requirements of 1292(b). Now, going back to everything that started us off on this -­ THE COURT: Well, that's an open issue for this panel because the ruling was without prejudice to our decision. MS. KLEIN: No, I appreciate that the panel is not bound by any decisions made at the motion stage. But I just wanted the Court to understand the sequence, and that the whole reason we said this is appropriate to hear now is -­well, two reasons, to avoid wasting time on distribution proceedings which could be very confusing to the class -­ THE COURT: But let me, you know, fast forward here -­ MS. KLEIN: Yes. THE COURT: --a little bit. Okay. Suppose we agreed with you that the district judge did not have jurisdiction to issue the monetary award for several reasons, not the least of which is that the Plaintiffs may have taken it out -­ MS. KLEIN: Yes. THE COURT: --of the case early. All right. What's left then of the 1292(b) appeal? MS. KLEIN: Well, this Court has, certainly has -­ THE COURT: The order -­ MS. KLEIN: --a number of grounds to vacate -­ THE COURT: We would necessarily have to reverse the order on which he granted the 1292(b). Now, once we do that what's left of this interlocutory appeal? MS. KLEIN: Well, the Court could do that. I'm not disagreeing. The Court has discretion to do a number of things because the Court could vacate the money award on a number of different grounds. It's not a steel company problem, the Court doesn't have to start with either Tucker (phonetic sp.) Act jurisdiction, or the fact that these -­ THE COURT: It's not Article 3, it's -­ MS. KLEIN: Exactly. THE COURT: Right. MS. KLEIN: The district court had jurisdiction to hear the controversy, and this Court certainly has appellate jurisdiction, and it can start with the antecedent issue. And the reason that we care about the Court starting with the antecedent issue is that every time we have an order of relief, you know, more proceedings in this case, as a practical matter it's diverting resources from other Indian program. This is what I want to make sure the Court understands, what Congress has said over and over again, and we quote one example from 2007, this is the appropriations committee, and I'm reading from 22 to 23 of our reply brief, "Since the inception of the Cobell case the committee has appropriated hundreds of millions of dollars for litigation and accounting activities. The committee believes that these funds would have been better used to fund greatly needed healthcare, law enforcement, and education programs in Indian country." So, the problem is that if the Court does what it could do, the minimum of just say no authority for money vacated is that we are concerned that we will continue to have more orders and oversight that divert resources from other important Indian programs. THE COURT: Well, I don't know what the district judge does if we do that because Judge Robertson has said that the kind of historic accounting that's needed is impossible. MS. KLEIN: Well, the district court --I know, well, obviously the Court knows, we believe that the district court was mistaken in that, that Congress made very clear from before the time it enacted the 1994 legislation. THE COURT: Congress could solve this problem in a minute. I mean, if they've got a problem with appropriating money for historic accounting and all the rest of it all they have to do is pass legislation, and then divide up the proceeds. And Congress did that, in fact, I hadn't thought about this, but in fact in the 1970s Congress did just that in the Alaskan Native Claims settlement. They had all this litigation going on, and they split the state up into 12 different regions, gave them a corporation, and then funded it to the tune of $900 million. So, they can do it. MS. KLEIN: Congress, of course, can do all sorts of things, but what Congress has said right below that same passage I just read is correct, which is that the underlying problem, the problem that needs money is fractionation, it's buying back the fractionated lands. This case is not a money case, and nothing that we have found has shown that these Plaintiffs are owed money. So, if we take what X amount of money and Congress says I'll do it, you know, it's not even rough justice because we have no showing of any injury, but it says I'm going to give it to these Plaintiffs, it's taking from somewhere. And, you know, most immediately it's taking away money that could be -­ THE COURT: Judge Robertson's -­ MS. KLEIN: --used to fix the problem. THE COURT: To simply, Judge Robertson's take on this was that Congress would not appropriate $450 million for an accounting, historic accounting, but it will appropriate $450 million to satisfy a money judgment. MS. KLEIN: Well, this was one of the many ways in which the district court was overstepping its bounds. Because, of course, just as the district court couldn't direct Congress to fund its mega-accounting plan, neither could it say as a remedy for a failure to find I'm just going to order a cash payment. And of course -­ THE COURT: I wish they'd appropriate money to fix the cooling system in this -­ MS. KLEIN: I'm sorry, the noise, I can't hear any more. I'll try to speak louder, but I also can't hear. THE COURT: Shayna (phonetic sp.)? MS. KLEIN: But I just want to, you know, again, I want to make clear back from what I was saying at the beginning, Congress could easily believe quite reasonably that the purposes of this historical accounting project have been accomplished, because what we now know, and there was no way to know this without spending hundreds of millions of dollars, but we now know that the records were kept just as a private fiduciary would have been required to keep them, on an individual level, and they check out. So, from Congress' perspective it doesn't need to pass legislation, it could just stop financing this work, which as Congress has said is coming at the expense of other Indian programs. Unless the Court has further questions I'll rest on our brief. JUDGE SENTELLE: Forgetting the Osage question for a moment -­ MS. KLEIN: I'm sorry? JUDGE SENTELLE: --what exactly would you like us to do today? We're not going to do it today, but what would you like us to do as a result of the argument we've heard today? MS. KLEIN: We'd like the Court to reaffirm for the third time that Interior was not ordered to do a multi-billion dollar accounting. We think this follows from what the Court has already said. And that should be it, because to the extent --as I said, Congress could think it's goals have been accomplished, and decisions about whether we're going to spend more money to learn more about the very old transactions really have to be made by Congress and the Secretary -­ JUDGE SENTELLE: And so we answer that -­ MS. KLEIN: --with an eye to the rest of the programs. JUDGE SENTELLE: --we answered that specific question in the fashion you want? MS. KLEIN: I'm sorry, Your Honor. I can't -­ JUDGE SENTELLE: I'm sorry. I'm sure if you can't hear me you can't hear anybody. But you answer that specific --we answer the specific question you just stated and the way you state, and does that obviate all the other questions that are proffered here before us to just proceed? MS. KLEIN: If I heard the question correctly, you know, we're asking, we've asked explicitly that there be no further retention of district court jurisdiction, that there's no relief that could be ordered under Southern Utah, and that the Plaintiffs in any event abandoned the effort to secure individual accounting six years ago. So, that's what we're asking. THE COURT: They abandoned the effort to --I didn't hear all that. MS. KLEIN: To secure the historical accounting project. After they got the Rosenbaum (phonetic sp.) report, which made clear that the named Plaintiffs had no claim for money, they switched gears and they started saying it's all impossible. They argued it on a different ground, they said there are no records, that's not true, and that was not the basis of the district court's ruling. But -­ JUDGE SENTELLE: We want to thank the Deputy Clerk for getting that noise shut off. MS. KLEIN: Thank you. JUDGE SENTELLE: Thank you very much. MS. KLEIN: But since 2003 absolutely consistently what they have argued is that it is impossible one way or another to do what Congress wanted in terms of retrospective analysis. THE COURT: The named Plaintiffs have --repeat that. The named Plaintiffs have, their accounts have been thoroughly audited, and they are due nothing. MS. KLEIN: Exactly. This is, and we have put the citations in our brief, this was the Rosenbaum study, this was a pilot, and it was very early on, it was a special $20 million appropriation, and that's cited in volume five of our appendix in that letter, and it was to trace back not only through the living named Plaintiffs' accounts, but they even looked back through predecessor accounts, the earliest transactions were in 1914, and they gathered 160,000 records, historical records from around the country relating to the named Plaintiffs and their predecessors, and did not only a reconciliation, but a transaction by transaction reconciliation, and the findings are in the --this is a summary Rosenbaum report, the original long version is under seal. I could supply it, but the summary is adequate for these purposes. And what was found was back in 1980 there was one named Plaintiff who should have gotten $60.94 that was posted to an account with a similar number. So that was one actually missing transaction. And then there were a larger number of what are called variances where the amount posted to the account was off a bit from what should have come in, but it was not off systematically, and if you net it all out the named Plaintiffs were overpaid $3,000. THE COURT: All right. This just comes to my mind, it's not really relevant to what you just said, but you say in your brief that because of the Court's order you have 250,000 accounts ready that have already, that are ready to go and be mailed out to the individual beneficiaries, but you can't do that because was it Judge Lamberth issued an order preventing the Government from communicating directly with any of the class members, is that what it was? MS. KLEIN: Yes, Your Honor. And after the 2006 decision in which this Court confirmed that there's no authority under Rule 23(d) to issue that type of substantive relief, then we went to Judge Robertson and said vacate the class communications bar, and he didn't rule on that one way or another, he said I'm deferring for the administrative convenience of the court that issue until the conclusion of the monetary remedies phase. So, we are still under an injunction that prevents us from communicating with class members. JUDGE SENTELLE: Unless my colleagues have further questions. THE COURT: Well, I have one question. What do you propose? Suppose we affirm the $400-some million, what's your proposal for distributing it? MS. KLEIN: Your Honor, there is no rational distribution mechanism. I mean, obviously, we don't think there's authority for the money, and we don't think it's consistent with the class action requirements. But what we know, from what we know about all the accounts and how they were kept is that there is no rational distribution mechanism. So -­ THE COURT: Unless you do an historical accounting. MS. KLEIN: Well, exactly. But still, there's been no proof of injury, so this money we talk about how the district court derived it, but it's not an estimate of any historical injury. THE COURT: Okay. MS. KLEIN: Thank you. JUDGE SENTELLE: Thank you, Counsel. I think we have an Intervenor somewhere. There's the Intervenor. Okay. ORAL ARGUMENT OF MERRILL C. GODFREY, ESQ. ON BEHALF OF THE INTERVENOR MR. GODFREY: Good morning, and may it please the Court, Merrill Godfrey for the Osage Nation. The Osage Nation is here only to protect its tribal trust account. The Plaintiffs here have argued that it is a tribal account in name only, and I want to explain briefly why that's incorrect. Before I do -­ JUDGE SENTELLE: What is it we're likely to do today that's going to effect the rights of the Osage Nation? MR. GODFREY: Well, if -­ JUDGE SENTELLE: There's been a dispute that I think is still open as to whether you're properly before us. And you might first want to convince us that you are. MR. GODFREY: Thank you. Let me address that. The claim that the Plaintiffs bring here is for disgorgement of funds from accounts that include the Osage Tribal Trust Account. The Osage Tribe has a case pending before Judge Robertson in the district court for equitable relief with respect to the Osage Tribal Trust Account. So, that is our claim, and they're trying to take our claim away from us, and that's why we're here, and that's why we have -­ JUDGE SENTELLE: Okay. MR. GODFREY: --standing. And I would note before I go into the statutory argument that it was only last year that the Plaintiffs first made this argument. We're a newcomer to this litigation because when it was a question of whether the accounting could be done, nobody was looking at the Osage Tribal Trust Account, it was only when the question of equitable monetary relief came into the picture that the Plaintiffs first argued that this Osage Tribal Trust Account through which billions of dollars of oil and gas royalties had passed was actually only a tribal account in name, and that's not so under any of the statutes here. The 1906 Act, the Osage Allotment Act, allotted the surface estate of Osage County, which is the Osage Reservation, but it preserved the mineral estate to the tribe as an unallotted asset. In Sections 2 and 3 of the Osage Act provide that royalties on the mineral estate are to be, "paid to the Osage Tribe." And Section 4 requires that all monies owed to the Osage Tribe, or paid to the Osage Tribe be held in trust for the Osage Tribe. THE COURT: That's pretty typical in that period, that sort of arrangement. It happened on the --it went to an Ouray (phonetic sp.) reservation in Utah, as well, and I think the (indiscernible 12:05:21) and the Navajo reservations under the same individual --we have the checkerboard reservation down there, but the individuals got their allotment, but the mineral interests remained with the tribe for distribution as the tribe saw fit, I think. MR. GODFREY: Okay. That may be, I'm not familiar with the other tribes. The purpose certainly is not an unusual one, which is a principle purpose of having a division of ownership in the mineral income between tribal funds and individual funds, and here that division is the quarterly distribution date, is that the funds that sit in the tribal account before distribution are not subject to individual debts, they can't be lost in bankruptcy as the Tarean (phonetic sp.) that we cite held, and they may be used for tribal purposes, such the 1906 Act itself provided, and as subsequent acts amending it provided, such as for example, in 1921 the royalties, "received by the Osage Tribe were to be used to pay gross production taxes on the tribe's minerals." Now, that's a tribal liability, the gross production tax owed to Oklahoma, and by federal law that's paid out of the tribal trust account. So, that's one example of how use of the account for tribal purposes shows that it's a tribal account. Another one is in 1938 the amendment provides that funds to the credit of the Osage Tribe are used to pay for official travel for the Osage government officials. So, when you get in the statute to the phrase that the Plaintiffs like, which is that the funds are placed to the credit of individual members of the tribe, that's after the statute has already established that there needs to be a tribal trust fund to receive the monies. The Section 4 clause that occurs later in that section, when you're talking about the placing the funds to the credit of individuals that's the quarterly distribution, it says that it's to be done as other monies are, as other tribal monies are distributed to individuals. THE COURT: What argument of the Plaintiffs would enable the class to get its hands on the tribal account that you claim exists? What is the argument that they're making? MR. GODFREY: My understanding of their argument is that this is de facto, and allotted, that this tribal trust account is a de facto allotment, and that it ought to be treated as an aggregate of individual IIM accounts. JUDGE SENTELLE: And as I've asked others, what you want us to do today, or what you want us to do is simply uphold the district court's ruling on this question as already made, right? MR. GODFREY: We want this Court to do as the district court did in respecting the division of ownership between the tribal trust account and monies that have been distributed out of that account and have become individual funds. JUDGE SENTELLE: I should ask the other --I will, they get up for rebuttal. Is that even really before us? On this certified appeal is the Osage question reopened, or is it now the current status of it the district court has ruled in your favor, and nobody brought that one up to us. MR. GODFREY: The Plaintiffs in their third question, the third question, and the district court also mentioned this, raised the question as to whether accounts that are tribal in name only but that actually constitute individual monies should have been included in calculating a monetary award. JUDGE SENTELLE: Okay. MR. GODFREY: And -­ JUDGE SENTELLE: I'll reopen that with Counsel when he gets back up. I'll probably give him three minutes instead of two since I'll be asking him about that. MR. GODFREY: Okay. Thank you, Your Honor. JUDGE SENTELLE: Thank you. MR. GODFREY: So, we agree with the district court to the extent that it respected the line in the Osage Act and amendments that provides for distribution on a quarterly basis, that's the line between tribal funds and individual funds. Now, if I could address briefly the cases that the Plaintiffs cite, they've taken phrases that they like out of these cases, but each of the cases that they've relied on has the same flaw, which is that none of them involve the claim that somebody should be able to dip into undistributed mineral income in the Osage Tribal Trust Account. United States v. Mason; West v. Oklahoma Tax Commission; the other cases that they cite involve questions such as in Mason and West does the restricted property of an individual head right holder that has already been distributed, the property that has already been distributed out of the account, out of the tribal account and into an individual Indian money account, is that money subject to taxes, or how should it be treated at the estate tax stage, for example? None of the cases include a claim to funds in the tribal trust account, and in fact the only case that does is one that we cite, which is Tarean. And in that case the bankruptcy trustee, the question was whether the bankruptcy trustee should include the value of the head right, and the head right is the right to receive the future distributions of income. And there the court examined the question and decided that Congress didn't want that because it wanted to protect head right holders against that kind of bankruptcy relief, and that's an important reason why keeping the tribe as a beneficiary of the tribal trust account protects head right holders. And a couple of other reasons are that the Osage Nation can protect the trust as a collective entity, and as a government for benefit of the people who are entitled to receive the future distributions. If the Plaintiffs had limited their claims here to only the distributed head right funds that had come out of the account we wouldn't be here today. So, if there are no other questions, that all I have. JUDGE SENTELLE: Seeing none, thank you, Counsel. We'll hear from the Appellants. We will give you back three minutes for rebuttal, Counsel. ORAL ARGUMENT OF DENNIS M. GINGOLD, ESQ. ON BEHALF OF THE APPELLANTS/APPELLEES MR. GINGOLD: Thank you, Your Honor. I'm going to be as brief as I can, and I appreciate the rebuttal time. First of all, a reading of Judge Robertson's decision is much different from Counsel for the Osage Tribe. At star eight of the decision he says the proceeds of the mineral estate were to be held in trust for, and distributed per capita to individual Osage Indians. He did not say the tribe, Your Honor. The reason he excluded funds that he held were Individual Indian Trust Funds from the recovery was because he said they were not within the IIM trust system. The trust system that the district court itself said was a construct for purposes of this litigation. Of course, there is no system, Your Honor. Witnesses testified to that. With that as the reason, he explicitly held what I just read. And Your Honor, the two Supreme Court cases confirm that, so we're relying on an explicit statute, the 1906 statute which explicitly states the funds are to be placed for the benefit of individual Osage Indians, not the tribe. That is not our language, that's Congress. They haven't changed that. In addition, the Supreme Court twice in Mason and West has affirmed that. With regard to the issue of what was regarded as the Rosenbaum Report, the Rosenbaum Report was not an audit, Your Honors, it was nothing but as was testified by Rosenbaum a member of the accounting firm, the Government collected information, provided that information to the accounting firm, and they tried to verify that the information they received was consistent. They did nothing more than that. They didn't gather a single document, they didn't verify a single transaction. One of the most important aspects of Cobell VI is that transactions have to be documented. What was even referenced in Cobell XVII, and this is very important because the issue of statistical sampling has become something that is beyond its importance in many respects, there's nothing in Cobell XVII that is inconsistent with what this Court ruled in Cobell VI. What Judge Williams was talking about at 1077 in Cobell XVII was the use of statistical analysis to verify transactions. So, not every transaction had to be individually verified. With regard to Rosenbaum no transactions were verified. THE COURT: How many of the 550 beneficiaries have you identified as having been short-changed by the Government in the last 100 years? MR. GINGOLD: You mean 500,000? THE COURT: Yes. MR. GINGOLD: Okay. Your Honor, we have said, and we've provided evidence in this proceeding from government documents from 1905 to the present that throughout time millions of dollars, these are government records, have not been disbursed to our clients. That's part of the -­ JUDGE SENTELLE: That's not the same question, however. MR. GINGOLD: We haven't identified a single individual. We've identified the aggregate dollars because that's how it's reported by the Government. We don't have the individual records. We rely on the records, the Government itself introduced these records as part of admitted analysis report. We reviewed every one of the records from 1905, record after record after record talks about the disbursement problems, the withholding, the fact that funds were intentionally withheld because our clients as a matter of law were deemed incompetent until 1951, therefore the Government was not disbursing the money, whether it was a non-Osage individual, or the Osage. As a matter of fact, with the Osage it was limited to $1,000 a quarter because of their competency status. Your Honor, that is the problem our clients have faced, have been facing. With everything that's been said we're still dealing with statutory construction. JUDGE SENTELLE: Unless my colleagues have further or follow up question we're over your three-minute rebuttal now. And seeing -­ MR. GINGOLD: Thank you, Your Honor. JUDGE SENTELLE: --no further questions the case will be submitted. (Recess.) DIGITALLY SIGNED CERTIFICATE I certify that the foregoing is a correct transcription of the electronic sound recording of the proceedings in the above-entitled matter. Paula Underwood May 15, 2009 DEPOSITION SERVICES, INC.