Cobell v. Kempthorne
2008 WL 3155157, 2008 U.S. Dist. LEXIS 59952, 569 F.Supp.2d 223 (2008)
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Rule of Law:
When a trustee's long-term failure to maintain adequate records makes a full accounting impossible, a court may use its equitable powers to award restitution based on a statistical model that estimates the trust shortfall, resolving all evidentiary doubts and uncertainties against the trustee.
Facts:
- Since 1887, the U.S. government has served as the trustee for Individual Indian Money (IIM) accounts, which hold funds derived from assets like mineral, timber, and grazing leases on lands allotted to individual Native Americans.
- Over the 121-year history of the trust, the government failed to maintain adequate, reliable, and complete records of the funds it collected and disbursed on behalf of the beneficiaries.
- The government's various accounting systems and ledgers were historically unreliable and could not be reconciled with each other or with the records of the Department of the Treasury.
- This failure in record-keeping made a full, transaction-by-transaction accounting of the trust practically impossible to perform.
- Due to the poor records, a significant discrepancy existed between the total funds the government's records showed as collected into the IIM system and the amounts actually posted to individual IIM accounts.
- The beneficiaries, represented by Elouise Cobell, alleged that funds were systematically withheld from their accounts and that the government improperly benefited from the use of this money.
- The government's management of the "IIM system" was complicated by the inclusion of non-individual accounts, such as Special Deposit Accounts (SDAs), which held funds not necessarily destined for IIM beneficiaries.
Procedural Posture:
- Plaintiffs filed a class-action lawsuit against the U.S. government in the U.S. District Court for the District of Columbia, seeking an accounting for the Individual Indian Money (IIM) trust.
- The litigation proceeded for over a decade, involving numerous rulings and appeals to the U.S. Court of Appeals for the D.C. Circuit, which affirmed the government's breach of its duty to account.
- In a prior ruling (Cobell XX), the District Court found that the government had failed to provide the mandated accounting and that rendering such an accounting was a practical impossibility.
- Following the impossibility finding, the plaintiffs sought equitable relief in the form of restitution and disgorgement.
- The District Court convened an evidentiary proceeding to determine whether a monetary award was warranted and, if so, in what amount, leading to the issuance of this memorandum opinion.
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Issue:
In a breach of trust suit against the U.S. government where a full accounting is impossible, may a district court use its equitable powers to award restitution based on a statistical model that estimates the trust shortfall, resolving evidentiary uncertainties against the government as trustee?
Opinions:
Majority - Judge James Robertson
Yes. In a breach of trust suit where the trustee's own nonfeasance makes a complete accounting impossible, a district court has the equitable authority to fashion a remedy based on a statistical model that estimates the amount of withheld funds, resolving all quantified uncertainty in favor of the beneficiaries. The court possesses broad equitable authority in trust cases, but this power is constrained by sovereign immunity when the government is the defendant. The plaintiffs' claim for restitution of withheld funds is a claim for "specific relief"—the return of the trust property itself—and thus falls within the Administrative Procedure Act's (APA) waiver of sovereign immunity, giving the court jurisdiction. However, the plaintiffs' claim for disgorgement of the "benefit to the government" is substantively a claim for interest or damages, which is barred by the no-interest rule and sovereign immunity, as it is speculative and not a claim for the return of a specific, identifiable fund. While a trustee's failure to account creates a strong evidentiary presumption against them, this principle must be applied flexibly to fit the unique scale and complexity of the 121-year-old IIM trust. Applying the presumption so strictly as to produce a windfall for the plaintiffs would be inequitable. The court rejected the plaintiffs' $47 billion model as methodologically flawed, biased, and an improper attempt to impose a "gold-plated" accounting standard previously rejected by the Court of Appeals. Conversely, the government's statistical model, using a technique called multiple imputation, was found to be a plausible and even-handed approach. It used the best available data to estimate the shortfall while also quantifying the degree of uncertainty caused by the missing records. By adopting this model and resolving the quantified uncertainty in the plaintiffs' favor at the highest level of statistical confidence (99%), the court could apply the equitable presumption against the trustee in a principled manner. This resulted in an award of $455.6 million, representing the amount necessary to restore the proper balance to the IIM trust.
Analysis:
This decision is significant for establishing a pragmatic judicial framework to resolve historical accounting failures that are otherwise intractable. It champions the use of modern statistical modeling as a tool of equity, demonstrating that the impossibility of a perfect accounting does not preclude a monetary remedy for a breach of trust. The opinion carefully navigates the jurisdictional limits of suing the government, reinforcing the crucial distinction between permissible "specific relief" under the APA and barred "money damages." This case sets a key precedent for future large-scale, complex litigation against the government where historical data is incomplete, ensuring that a trustee's own record-keeping failures cannot be used as a shield against liability.
