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Mahnomen County v. Bureau of Indian Affairs: INDIAN - Bureau of Indian Affairs determination that land was WELSA-acquired; based on agency record

1
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Mahnomen County, Minnesota,
Plaintiff,
v. MEMORANDUM OPINION
AND ORDER
Civil No. 08‐5180 (MJD/RLE)
The Bureau of Indian Affairs,
Dirk Kempthorne in his official
capacity as the Secretary of the
Interior, and the United States,
Defendants.
_____________________________________________________________________
Scott G. Knudson and Daniel J. Supalla, Briggs and Morgan, P.A. for and
on behalf of Plaintiff.
Amy S. Tryon, Trial Attorney, U.S. Dept. of Justice, Ronald J. Tenpas,
Assistant Attorney General and Marcia M. Kimball, Department of the Interior,
Office of the Solicitor for and on behalf of Defendants.
_____________________________________________________________________
This matter is before the Court on Defendants (collectively the United
States) motion to dismiss or in the alternative for summary judgment.
BACKGROUND
The White Earth Band of Chippewa Indians (hereinafter the Band)
purchased certain parcels of land in 1991 upon which the Band operates gaming
2
operations at the Shooting Star Casino (hereinafter referred to as the Casino
Property or Tract 1ʺ). Id. It is the Bands position that the Casino Property was
purchased through funds made available in the White Earth Lands Settlement
Act (WELSA), Pub. L. 100‐153, Act of Nov. 5, 1987, 101 Stat. 886 (1986).
WELSA was enacted to address uncertainties as to title to certain allotted
Indian lands within the White Earth Indian Reservation and as recompense to the
Band for consequences that arose due to the uncertainties to land titles. WELSA
2 and 6(a). In addition to settling unresolved legal issues raised by the Band,
the United States and the State of Minnesota, WELSA provided for the
establishment of The White Earth Economic Development and Tribal
Government Fund. WELSA 12(b). WELSA further provides that any lands
within the exterior boundaries of the reservation acquired through this fund
shall be held in trust by the United States. WELSA 18. Section 18 further
provided that lands so acquired by the Band shall be deemed to have been
reserved from the date of the establishment of said reservation and to be part of
the trust land of the White Earth Band for all purposes.
In 1995, the Band applied to the federal government to put the Casino
Property into trust. (AR001173.) The application was approved by the Assistant
3
Secretary for Indian Affairs, subject to the Band satisfying all title requirements in
accordance with 25 C.F.R. 151.12, and that the Band obtain approval of all
financing and land‐related documents if such approval is required by 25 U.S.C.
81 and/or 25 C.F.R. Part 162. (AR0001390.) Due to outstanding title objections,
the Casino Property was not taken into trust at that time. (AR001274, 001053.)
In 2000, the Band inquired of the Bureau of Indian Affairs (BIA) as to the
effect of Section 18 of WELSA, and whether it had the effect of removing land
purchased pursuant to that section from the requirements of 25 C.F.R. 151.
(AR001368.) In response, the BIA concurred in the opinion that lands acquired
pursuant to Section 18 of WELSA should follow the mandated acquisition
requirement in 25 C.F.R. 151. (AR001369.) In July 2002, the Band formally
requested the BIA to take the Casino Property into trust as a mandatory
acquisition under Section 18 of WELSA. (AR001251‐52, 001086.) In support of its
request, the Band submitted documents to demonstrate that the Casino Property,
or Tract I, had been purchased with WELSA funds. (See AR000936, 000959‐61,
Affidavit of Frank Johnson, CFO for the Band, and audit reports.)
Initially, the BIA determined these documents were insufficient from
which to determine whether the Casino Property was purchased with WELSA
4
funds, and requested additional information from the Band, such as bank
statements and other financial documents. (AR000894, 000730.) The Band did
submit additional documents, but informed the BIA that many of the documents
requested had been destroyed in a flood, including bank statements and
cancelled checks. (AR000739‐779, deeds, purchase agreements, the Bands
investment plan.) A senior financial analyst at the Office of Indian Gaming
Management (OIGM) reviewed the documents the Band did submit, and
concluded that such documents established by a preponderance of the evidence
that WELSA funds had been used to purchase the Casino Property. (AR000255‐
57.)
On March 23, 2006, the BIA Midwest Regional Director issued a Notice of
Decision to take the Casino Property into trust as a mandatory acquisition
pursuant to Section 18 of WELSA. (AR000239‐242.) The Notice, however,
described two tracts of land, Tract 1 and Tract 2. The United States asserts that
inclusion of the reference to Tract 2 was error.
The State of Minnesota properly appealed the BIAs decision to the Interior
Board of Indian Affairs (IBIA). (AR000058‐59.) The County, however, did not
file a timely appeal. By Order dated July 3, 2008, the IBIA affirmed the decision
5
of the BIA. State of Minnesota v. Acting Midwest Regional Director, 47 IBIA 122,
127 (2008) (AR00003‐10.) The IBIA specifically found that the record supported
the Regional Directors decision, which included the OIGM analysis of the
financial documents, together with supporting documents. Id. After the IBIA
issued its decision, the BIA published notice of its intent to acquire the land in
trust in the Mahnomen Pioneer. (Ex. 2.)
STANDARDS OF REVIEW
A. Motion to Dismiss
When considering a motion to dismiss under Rule 12(b)(6), the Court
accept[s] as true all of the factual allegations contained in the complaint, and
review[s] the complaint to determine whether its allegations show that the
pleader is entitled to relief. Schaaf v. Residential Funding Corp., 517 F.3d 544,
549 (8th Cir. 2008) (citing Bell Atlantic Co. v. Twombly, 550 U.S. 544, 127 S. Ct.
1955 (2007)).
While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not
need detailed factual allegations . . . a plaintiffs obligation to provide the
grounds of his entitle[ment] to relief requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause of action
will not do . . . Factual allegations must be enough to raise a right to relief
above the speculative level . . . on the assumption that all the allegations in
the complaint are true (even if doubtful in fact).
6
Twombly 127 S. Ct. at 1964‐65 (citations omitted). [W]e do not require
heightened fact pleading of specifics, but only enough facts to state a claim to
relief that is plausible on its face. Id. at 1973.
B. Summary Judgment
Summary judgment is appropriate if, viewing all facts in the light most
favorable to the non‐moving party, there is no genuine issue as to any material
fact, and the moving party is entitled to judgment as a matter of law. Fed. R. Civ.
P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322‐23 (1986). The party seeking
summary judgment bears the burden of showing that there is no disputed issue
of material fact. Celotex, 477 U.S. at 323. This burden can be met by showing ‐
that is, pointing out to the district court ‐ that there is an absence of evidence to
support the nonmoving partys case. Id. at 325. The party opposing summary
judgment may not rest upon mere allegations or denials, but must set forth
specific facts showing that there is a genuine issue for trial. Krenik v. County of
Le Sueur, 47 F.3d 953, 957 (8th Cir.1995).
C. Review of Administrative Decisions
A final federal agency decision is reviewed pursuant to the Administrative
Procedures Act (APA), 5 U.S.C. 706(2). Under the APA, an agency decision
7
can be reversed where the agency action was arbitrary or capricious, an abuse of
discretion or otherwise not in accordance with the law. 706(2)(A). To make
this finding the court must consider whether the decision was based on a
consideration of the relevant factors and whether there has been a clear error of
judgment. Overton Park, 401 U.S. at 416. Agency decisions are given a high
degree of deference. Sierra Club v. EPA, 252 F.3d 943, 947 (8th Cir. 2001). The
court is not empowered to substitute its judgment for that of the agency.
Overton Park, at 416.
Review is typically based solely on the administrative record. In making
the foregoing determinations, the court shall review the whole record or those
parts of it cited by a party, and due account shall be taken of the rule of
prejudicial error. 5 U.S.C. 706.
If the record before the agency does not support the agency action, if the
agency has not considered all relevant factors, or if the reviewing court
simply cannot evaluate the challenged agency action on the basis of the
record before it, the proper course, except in rare circumstances, is to
remand to the agency for additional investigation or explanation. The
reviewing court is not generally empowered to conduct a de novo inquiry
into the matter being reviewed and to reach its own conclusions based on
such an inquiry.
Fla. Power & Light Co. v. Lorion, 470 U.S. 729, 744 (1985).
8
D. Conversion of Motion to Dismiss to Summary Judgment
A motion to dismiss may be converted to a motion for summary judgment
where matters outside of the pleadings are considered by the Court. Fed. R. Civ.
P. 12(d). When the Court is reviewing agency action, as it is in this case, the Court
sits as an appellate tribunal, not as a court authorized to determine in a trial‐type
proceeding whether the Secretarys study was factually flawed. Marshall
County Health Care Auth. v. Shalala, 988 F.2d 1221, 1225 (8th Cir. 1993). The
entire case on review is a question of law, and only a question of law. And
because a court can fully resolve any purely legal question on a motion to dismiss,
there is no inherent barrier to reaching the merits at the 12(b)(6) stage. Id. at
1226.
The County nonetheless asks that the Court convert this motion to one of
summary judgment, and asks the Court to consider matters outside of the
administrative record. It is the Countys position that the decision of the IBIA is
erroneous, and as support, the County has submitted an opinion from a forensic
accountant. The County also seeks additional discovery to support its claim that
the IBIAs decision is erroneous. As noted above, however, a party that is
challenging an agency action ordinarily is not entitled to augment the agency
9
record. Id.; see also, Am. Bioscience, Inc. v. Thompson, 269 F.3d 1077, 1084 (D.C.
Cir. 2001) (Absent very unusual circumstances the district court does not take
testimony.) (citing Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402,
420 (1971). In Overton Park, for example, the Court determined that when the
administrative record is bare, the district court may require further explanation
from the Secretary in order to review the Secretarys decision. 401 U.S. at 420.
Here, however, the administrative record is substantial.
ANALYSIS
A. Was the BIA Decision Arbitrary and Capricious or Contrary to Law?
The United States asks the Court to dismiss this action pursuant to Rule
12(b)(6) as the Countys challenges to the BIAs decision fail as a matter of law.
As an initial matter, the Secretarys Notice of Decision, as noted above,
includes references to Tract 1 and Tract 2. The United States concedes that
reference to Tract 2 in the Notice of Decision was a mistake, and that the BIA is
not treating Tract 2 as a mandatory acquisition. The Band does have an
application pending to have Tract 2 taken into trust as a discretionary acquisition.
The Secretary is complying with all regulatory requirements and has not yet
rendered a decision on that application.
10
With respect to Tract 1, or the Casino Property, the County argues there
were insufficient facts before the BIA to support a finding that WELSA funds were
exclusively used to purchase the Casino Property. The United States responds
that there was sufficient evidence, and that the Countys desire for a different
outcome does not render the BIAs decision arbitrary or capricious.
The administrative record includes an affidavit from the Bands CFO, Frank
Johnson, with accompanying documents, in which Mr. Johnson states that in his
capacity as accountant for the special project involved in the development of the
Shooting Star Casino, he was aware of and did the accounting for the monies that
were used for the expansion of the casino, which included the monies obtained
the White Earth Reservation Land Settlement Act. (AR000959, 4.) He further
states that he reviewed the Bands investment plan on the use of the interest
generated from the deposit of the WELSA funds, and that such plan called for
interest earnings to be split three ways, one of which was dedicated to land
acquisition. (Id. 6.) Based on his review of the balance sheets and audit reports
for fiscal year end September 30, 1991, and Statements of Revenue, Mr. Johnson
determined that WELSA funds were used to purchase the parcels of land from
Winifred Blaser, S & T Motors and Claude Stevens, which lands make up the
11
Casino Property. (Id. 7‐13.)
After an initial review, the BIA requested additional documents from the
Band, many of which the Band was able to forward to the BIA, such as deeds,
purchase agreements and the Bands investment plan. (AR000744‐47, 000749‐50,
000752.) Some of the documents requested, however, a third purchase agreement
and the cancelled checks, were destroyed by a flood. (AR000740.)
All of the documents submitted by the Band were then given to a senior
financial analyst with the OIGM. Based on that review, the analyst concluded
Even absent canceled checks, records make it clear that the White Earth Band
purchased the parcels with tribal funds, and no other source of funds for the
purchase, nor any nonpayment, has been asserted. (AR000343.) He further
noted that 9,170.57 constituted fiscal earning on the WELSA funds, and that
the preponderance of evidence shows that the White Earth Band used [WELSA]
funds, and/or earnings on the funds, for the purchase of [Tract 1]. (Id.) Despite
the Countys protestations, the United States argues the analysts conclusion was
reasonable.
The County asserts that the documents allegedly reviewed by the OIGM
analyst were presented to a forensic accountant, Phil Williams, who opined that
12
such documents did not establish that the Casino Property was purchased
exclusively with WELSA funds and that the BIAs decision was flawed in several
fundamental respects. (Larson Aff., Ex. 10.) The County further argues that the
OIGM analyst was directed to conclude that WELSA funds were used to purchase
the Casino Property. Finally, the County argues that the BIAs error in including
Tract 2 in the Notice of Decision, when the administrative record makes no
mention of Tract 2, shows bad faith on the part of the agency.
To be entitled to discovery or to rely on matters outside of the
administrative record, the County must make a strong showing that the BIA acted
with bad faith or improper behavior. Maxey v. Kadrovach, 890 F.2d 73, 77 (8th
Cir. 1989); see also Voyageurs Nat. Park Assn v. Norton, 381 F.3d 759, 766 (8th
Cir. 2004) (exceptions which allow discovery in actions challenging agency review
must not be casually invoked). The Court finds, however, that the County has not
made such a showing. Accordingly, matters outside the administrative record
should not be considered.
In an action similar to this, the Tenth Circuit Court of Appeals remanded a
matter to the Secretary of the Interior based on the courts finding that the
documents reviewed by the Secretary did not substantially support the Secretarys
13
determination that certain lands were purchased with specific funds that would
require a mandatory trust placement. Sac & Fox Nation of Missouri v. Norton,
240 F.3d 1250, 1263‐64 (10th Cir. 2001.) In fact, the documents on their face
suggested that nearly half of the funds used to acquire the land at issue were not
from the requisite fund. Id. at 1263.
In this case, the Midwest Regional Director for the BIA, Larry Morrin, was
aware of the Sac & Fox Nation case, and because of that case, was concerned as to
whether the Band had submitted sufficient documents to support a finding that
the Casino Property had been purchased with WELSA funds. (AR000737.) As a
consequence, he sent the documents to the OIGM analyst for his professional
determination. (Id.)
The Court further finds that the administrative record does not support the
Countys contention that the OIGM analyst was directed to conclude that WELSA
funds were used to purchase the Casino Property. Mr. Morrin asked the OIGM
analyst to review the Bands documents and determine whether such documents
are sufficient to demonstrate that WELSA funds were used to purchase the Casino
Property. If you determine the financial data is sufficient we ask you to proceed
with the publication of the Federal Register notice. . . . If you determine the
14
evidence is insufficient we ask that you provide advice on the recommended next
step in the process or alternatives for the Tribe. (AR000737.) Such concern on
the part of Mr. Morrin certainly does not support a finding of bad faith or
improper behavior on the part of the BIA.
Finally, the Court finds that the inclusion of Tract 2 in the Notice of
Decision does not support a finding of bad faith. The administrative record
makes no mention of Tract 2. In addition, the administrative record as a whole
demonstrates the recognition by the BIA that its decision must be supported by
documentary evidence. Thus, the inclusion of Tract 2 in the Notice of Decision
can reasonably be viewed as nothing more than a typographical error.
The County argues that the Sac & Fox Nation decision is on point to this
case. As in Sac & Fox Nation, the documents before the BIA, on their face, do not
support a finding that WELSA funds exclusively were used to purchase the
property. Thus, the County believes remand to the Secretary is appropriate for a
more thorough determination as to the source of funds used to purchase the
Casino Property.
The Court finds, however, that the Secretarys decision to take the Casino
Property into trust is reasonable and supported by ample evidence. After
15
reviewing all relevant documents submitted by the Band, the OIGM analyst
concluded that a preponderance of the evidence supported a finding that WELSA
funds were exclusively used to purchase the Casino Property, and that there was a
lack of evidence that other funds were used to purchase the Casino Property.
When reviewing agency actions, the question is not whether the Court would
have come to the same conclusion, but whether the agency conclusion is
supported by a rational basis. Voyageurs Natl Park, 381 F.3d at 763; Ctr. for Auto
Safety v. Dole, 828 F.2d 799, 804‐05 (D.C. Cir. 1987) (holding that [t]he APA does
not permit a reviewing court to decide which side of the factual dispute it thinks
the preponderance of the evidence in the administrative record falls on).
Based on the above, the Court finds that the Secretarys decision was
neither arbitrary and capricious nor contrary to law.
B. Application of 25 C.F.R. 151.10 Procedures for Discretionary
Acquisition.
The County further argues that unless there is evidence that WELSA funds
were exclusively used to purchase the Casino Property, the regulations set forth in
25 C.F.R. 151.10 should have been followed, to have given the County notice and
an opportunity to be heard before the acquisition was approved.
16
The United States responds, however, that these regulations apply to
discretionary acquisitions, not to mandatory acquisitions. In particular, 25 C.F.R.
151.10 clearly states that the section applies only were the acquisition is not
mandated. See also Confederated Salish & Kootenai Tribes v. United States ex.
rel. Norton, 343 F.3d 1193, 1194‐95 (9th Cir. 2003) (stating the Section 151.10
requires the Secretary to provide notice to state and local governments before
approving discretionary land acquisitions). In a Memorandum Opinion in a
related case, issued contemporaneously with this Memorandum Opinion, this
Court has determined that Section 18 of WELSA clearly and unequivocally creates
a mandatory trust acquisition where land acquired by the Band is located within
the White Earth Band Reservation and was acquired with WELSA funds. (See
White Earth Band et al. v. County of Mahnomen et al., Civ. No. 07‐3962.) See also
Churchill County v. United States, 199 F. Supp.2d 1031, 1033‐34 (D. Nev. 2001)
(finding that shall is a mandatory term, indicating lack of discretion on the part
of the Secretary); Nevada v. United States, 221 F. Supp.2d 1241, 1246‐47 (D. Nev.
2002) (same); Sault Ste Marie Tribe of Lake Superior Chippewa Indians v. United
States, 78 F. Supp.2d 699, 702‐03 (W.D. Mich. 1999) revd on other grounds 288
F.3d 910 (6th Cir. 2002) (same).
17
The County responds that the courts opinion in Sac & Fox Nation, 240 F.3d
1250, creates a condition precedent to a mandatory trust application ‐ specifically
that a tribe must demonstrate that statutorily allocated funds were the exclusive
source of funds for the land acquisition. The United States does not appear to
disagree that evidence had to be presented to demonstrate that the Casino
Property was purchased exclusively with WELSA funds. But, as discussed above,
sufficient evidence had been presented to establish such fact, therefore the
mandatory procedures were properly followed.
CONCLUSION
Because the Court finds that the Secretarys decision is reasonable and
supported by a rational basis, the Countys Complaint requesting that the Court
set aside the Secretarys decision must be dismissed.
18
IT IS HEREBY ORDERED that the Motion of the United States to Dismiss or
in the Alternative for Summary Judgment [Doc. No. 7] is GRANTED. This case is
hereby dismissed with prejudice. The Countys Motion for Discovery [Doc. No.
20] is DENIED.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Date: March 24, 2009
s/ Michael J. Davis
Michael J. Davis
Chief Judge
United States District Court
Civil No. 08‐5180
 

 
 
 

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