GM 16-023

District Court Issues Decision in Maniilaq Association v. Burwell

On March 22, 2016, Judge John D. Bates of the United States District Court for the District of Columbia issued the attached memorandum opinion and order in Maniilaq Association v. Burwell, No. 15-152 (D.D.C.) (“Maniilaq II”), ordering the Indian Health Service (IHS) to negotiate lease compensation under Section 105(l) of the Indian Self-Determination and Education Assistance Act (ISDEAA) and implementing regulations for a proposed lease of Maniilaq Association’s clinic facility in Kivalina, Alaska. The ruling vacates the IHS’s denial of the proposed lease on the grounds that the compensation requested by Maniilaq Association, which was based on specific criteria set out in the Section 105(l) implementing regulations, exceeded the amount to which Maniilaq Association is entitled under the ISDEAA.

The case is a sequel of sorts to the 2014 decision in Maniilaq Association v. Burwell, 72 F. Supp. 3d 227 (D.D.C. 2014) (“Maniilaq I”), in which the district court held that a similar proposed lease for Maniilaq Association’s clinic facility in Ambler, Alaska was awarded as a matter of law when the IHS failed to respond to the lease proposal within the mandatory time period for ISDEAA Title V final offers. That case established that a Section 105(l) lease may be incorporated into an ISDEAA funding agreement and submitted as a final offer—a fact the IHS had disputed—but did not reach the question of whether Section 105(l) and its implementing regulations require the IHS to compensate for a Section 105(l) lease according to any specific criteria.

Maniilaq II squarely raised the question of lease compensation for the district court to decide. Section 105(l)(2) requires that the Secretary “shall compensate” an Indian tribe or tribal organization for a lease entered pursuant to that section, and states that such compensation “may include rent, depreciation based on the useful life of the facility, principal and interest paid or accrued, operation and maintenance expenses, and such other reasonable expenses that the Secretary determines, by regulation, to be allowable.” The Secretary’s implementing regulations at 25 C.F.R. §§ 900.69-900.74 provide that “[t]here are three options available” for a tribe or tribal organization to choose from when proposing lease compensation: (1) fair market rental; (2) a combination of fair market rental and specific cost elements listed in the regulations (including depreciation, operation and maintenance, and other costs); or (3) the regulatory cost elements only.

Maniilaq Association had proposed lease compensation based on the third option (the regulatory cost elements) for its proposed lease of the Kivalina facility. Maniilaq Association took the position that the IHS may deny duplicative or unreasonable costs, or costs that do not meet the regulatory criteria, but is otherwise bound by the regulations to provide lease compensation based on the listed cost elements. The IHS, on the other hand, argued that the cost elements and other compensation options specified in the regulations are discretionary, and that the IHS is therefore free to limit lease compensation based on other factors if it so chooses. For Maniilaq, the IHS sought to limit the lease compensation to the Section 106(a)(1) program amount that Maniilaq historically received for a Village Built Clinic Lease/Construction program in Kivalina through its ISDEAA funding agreement. That amount, in turn, was based on the amount the IHS historically paid to lease clinic space from the Village of Kivalina using a “full service lease” under discretionary leasing authority with no statutory or regulatory compensation requirements.

Judge Bates closely reviewed the statutory and regulatory language and found that they were ambiguous. He decided, however, that “Maniilaq offers a reasonable interpretation of an ambiguous statute and its ambiguous regulations.” He continued, “Because the Secretary has not shown that her alternative reading is compelled by those sources, the Court will—as it must—construe the ambiguity in Maniilaq’s favor.” In so ruling, Judge Bates relied on the Indian law principle of interpretation—which is explicitly required by the ISDEAA as well as its implementing regulations—that ambiguities in statutes or regulations benefitting Indian tribes must be resolved in favor of the tribes. Judge Bates also noted that the IHS’s argument had significant gaps and did not adequately explain the compensation requirement in Section 105(l).

Noting that negotiations between the parties had broken down as a result of their conflicting legal positions, Judge Bates ordered the parties to resume negotiations consistent with his opinion on the meaning of the regulatory requirements. It remains to be seen whether the IHS will seek to appeal the ruling, but if it stands Judge Bates’ opinion has significant implications for tribes and tribal organizations seeking to enter into fully compensated Section 105(l) leases for Village Built Clinics and other facilities used to carry out ISDEAA contracts and compacts in Alaska and throughout the country.

Please let us know if we may provide additional information regarding the Maniilaq Association v. Burwell ruling and its potential impacts.