Prejudgment Interest

San Juan, a Mescalero Apache chief; standing, holding a spear. Courtesy of the National Archives.

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The Mescalero Apache Decision

In 1973, the Indian Claims Commission ruled in favor of the Mescalero Apache Tribe (and 21 other plaintiff tribes) on the claim that the government had been obligated to pay interest on IMPL funds held in the Treasury from 1883 until 1930 when Congress expressly made IMPL funds interest bearing, but had not done so. The case was considered so important that an Indian Claims Section attorney, Gordon Daiger, spent a year in preparing his brief for the Commission, much of which was consumed locating relevant archival documents. As noted, the Commission ruled in favor of the plaintiffs, but on appeal the Court of Claims reversed. United States v. Mescalero Apache Tribe, 518 F. 2d 1309, 1315-34 (1975), cert. denied, 425 U.S. 911(1976). The Court:

  • ruled that the plaintiffs had cited no contract, treaty or agreement which required that the United States pay interest on IMPL funds in the 1883-1930 period; 518 F.2d at 1316.
  • found that the United States had not waived its sovereign immunity to suit for the recovery of interest on IMPL funds by Indian tribes; 518 F.2d at 1315.
  • rejected the argument that the Indian Claims Commission Act authorized the award of interest. Id. at 1316.

Mescalero Apache clearly merits the description of a "landmark" decision in ICCA jurisprudence.

The Short Decision

In 1995, the Federal Circuit approved what the United States had contended was an unauthorized award of prejudgment interest. Short v. United States, 50 F. 3d 994 (Fed. Cir. 1995). The Short plaintiffs, Yurok Indians residing on the Hoopa Valley Indian Reservation, alleged that they had been wrongfully excluded from yearly distributions of revenue generated from the management of the very valuable commercial timber on the Reservation. They alleged that these revenues had been deposited in the Hoopa Valley Tribe's IMPL account and distributions had been made only to members of the Hoopa Valley Tribe and the Tribe itself. The Court of Federal Claims awarded the plaintiffs interest from the date of each wrongful distribution (the first occurring in 1957) to the members of the Hoopa Valley Tribe, to the date of final judgment.

On appeal, the Government renewed its argument that "no statute entitles the plaintiffs to the award of pre-judgment interest on their awards." 50 F.3d at 998. While the Federal Circuit agreed there was no statute authorizing pre-judgment interest, it held that "we see the investment statutes as providing a basis for the award of interest as part of the plaintiffs' damages.” See 25 U.S.C. §§ 161a, 161b and 162a (1988) (citations omitted)." (Sections 161a mandates the investment of Tribal Trust funds held in the Treasury. Section 161b requires that 4% simple interest be paid annually on tribal IMPL funds held in the Treasury. Section 162a authorizes the Secretary of the Interior to invest tribal (and individual) trust funds in certain types of investment vehicles.)

In response to the Government's argument that the interest authorized to be paid on Tribal Trust funds is only payable while these funds remain in a trust account, the Court held that the cited statutes, "in conjunction with the government's fiduciary duty to Indian tribes [citing Mitchell II], give the plaintiffs a substantive right to damages, including interest . . . " Id.1The Court concluded that "the government owes the plaintiffs interest, not as interest on damages, but part of the damage award itself." Id. at 999. The dissenting judge agreed with the government that none of the statutes upon which plaintiffs relied "contain the affirmative and unequivocal language necessary to entitle them to an award of interest . . . " Id. at 1002.

The Shoshone Decision

In 2004, the Court of Appeals for the Federal Circuit held that it could award interest on damages awarded the Tribe for alleged mismanagement of its natural resources. Shoshone Indian Tribe of the Wind River Reservation v. United States, 364 F.3d 1339 (Fed. Cir. 2004), cert. denied, 544 U.S. 973 (2005). Relying on the 1968 Peoria decision 2 the Court concluded that the CFC could award interest on damages representing revenues which should have been generated by proper management, but were never in existence. Notwithstanding the efforts to distinguish the Court of Claims' 1981 Mitchell decision, it is difficult to reconcile Shoshone with that decision. See Oenga v. United State,  91 Fed. Cl. 629, 648-50 (2010); Mitchell v. United States, 229 Ct. Cl. 1, 14, 664 F.2d 265, 275 (1981) (en banc), aff'd on other grounds, 463 U.S. 206 (1983) . In the Mitchell decision, the Court ruled that interest may not be granted on damages awarded for the mismanagement of Indian lands and natural resources held in trust because these damages represented revenues which had never existed and had never been deposited in an interest bearing trust account. It should be noted that Mitchell was an en banc decision as opposed to Shoshone, a panel decision, which could not overrule Mitchell.

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1It is interesting to note that in Mescalero Apache, the Court of Claims had held that the Indian Claims Commission was not free to justify the award of pre-judgment interest by characterizing the interest as "damages."

2The case of Peoria Tribe of Indians of Oklahoma v. United States, 390 U.S. 468 (1968) concerned a 1854 Treaty pursuant to which the Peoria Tribe ceded 208,585 acres of its land the United States to be sold for the Tribe's benefit; the Treaty directed the government to sell the lands at public auction and provided for investment of the sale proceeds. However, the government sold the lands by means of a private sale. The Tribe sued to recover the difference between what revenues would have been realized if the lands had been sold at public auction and the amount of revenues actually collected (a difference of $172,726) plus interest on that difference. The Court held that the obligation to invest the proceeds applied to proceeds which "were never in fact received" because of the government's breach of the Treaty. 390 U.S. at 471-73.

 

Updated May 12, 2015

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