GM 13-047

Court Finds IHS Must Adopt the Seneca Nation’s Proposed Self-Determination Amendment the Agency Failed to Reject Within 90-day Window

On May 23, 2013, the D.C. District Court awarded the Seneca Nation $7.55 million in increased funding for its self-determination contract with the Indian Health Service (IHS). The Court held that IHS was responsible for the increased payments because it failed to respond to Seneca’s proposed amendments within 90 days as required under the Indian Self-Determination and Education Assistance Act (ISDEAA) and its regulations. While stating the case was a simple matter of a missed deadline, the Court also rejected IHS’s arguments as to why it should not have to pay the increased costs.

The case involves errors in counting Seneca’s user population, which affected the base funding (the Secretarial amount) in the Tribe’s FY 2010 and 2011 funding agreements. The Tribe found IHS did not count more than more than 12,150 patient visits because the patients’ mailing addresses were listed as towns in different states, outside of the Tribe’s service area. When it discovered the error, the Tribe sent a letter to IHS asking them to investigate, and explicitly proposing two amendments to its contract, one each to funding agreements for FY 2010 and FY 2011. The Tribe calculated the mistakes cost the Tribe between $2.87 million and $6.8 million per year, and proposed amendments of $3.78 million.

The IHS acknowledged receipt of the letter on May 3, 2011, but then failed to respond to it within the 90-day window set by the ISDEAA and IHS regulations. The IHS could have rejected the proposed amendments for any of five reasons set out in the law, but the law also states that if they do not respond at all within 90 days of receiving the amendments, then they go into effect automatically. See 25 U.S.C. § 450(f)(a) and (b). The IHS did not respond at all until the Tribe sent a letter 120 days after its initial letter stating the Tribe now considered its amendments to be in effect.

The IHS did not claim it responded in the 90-day window, and the Court found the Tribe’s proposed amendments were effective. The Court also rejected four arguments IHS presented asserting they should not have to pay the increased costs.

First, IHS asserted the proposed amendments were not proper because the FY 2010 and 2011 funding agreements had already been signed and IHS had already completed payment. The Court rejected this argument, finding instead that since the underlying contract was for an indefinite period, the funding agreements were merely yearly negotiations on how to fulfill the contract, and that there was no set time for “completion.” The Court explained that since the funding agreements are based on estimates about future costs, changing circumstances may necessitate later amendments to add more funding. The Court found that nothing in the contract language precluded proposed amendments, and that IHS could not complain about the consequences for its failure to respond to the proposal.

Second, IHS argued that the proposed amendments were not actually amendments at all, but a “claim” that had to be dealt with under the Contract Dispute Act. IHS asserted that “amendments” needed to propose a takeover of new programs or services, and that complaints about funding for current programs were merely “claims.” The Court rejected this argument, explaining that claims assert rights under the current agreement, while amendments, like the Nation’s, propose changes to the current agreement.

Third, IHS claimed it could not increase funding to the Tribe since it would harm other tribes and be in excess of the contract’s funding level. The Court held that IHS could not use alleged harm other tribes to excuse a contract obligation, pointing to the Supreme Court’s decision in Cherokee Nation. On the excessive funding argument, the Court indicated IHS could have declined the proposed amendments on this basis within 90 days, but that IHS waived that argument when it failed to respond by the deadline.

Finally, the IHS asserted it should not have to pay the Tribe because the Tribe did not conclusively prove its formula for arriving at $3.78 million additional funding per year. The Court ruled that the burden was on IHS to approve or reject the proposal during the 90-day period, and not on the Tribe to conclusively prove its methodology after the amendment became effective by operation of law. The Court held the amount was reasonable anyway, as the Tribe applied a method resulting in mid-range costs out of five methods provided by IHS itself.

Overall, the case stands for the idea that the government must respond to a tribe’s proposed contract or funding agreement amendments within the 90-day window set in law, and that a court will not “save” agencies if they miss this deadline. The IHS has the opportunity to appeal this case to the D.C. Circuit Court of Appeals, but has not yet done so. We will follow the litigation and report any further developments.

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