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Indian Nations Law Update - April 2012

April 12, 2012

Tribes Take Advantage of (Embattled) Section 8(a) Small Business Development Program

The federal government obligates hundreds of billions of dollars in contracts for goods and services each year. Many tribes and Alaska Native Corporations (ANCs) have formed small business concerns (SBCs) to take advantage of contracting preferences under Section 8(a) of the Small Business Act for "socially and economically disadvantaged small business concern[s]," including economically disadvantaged members of tribes and economically disadvantaged tribes. In fiscal year 2010, the federal government awarded $18.5 billion to 8(a) entities, including $5.5 billion to tribal 8(a)s.

"Socially disadvantaged" individuals are those who have been subjected to racial or ethnic prejudice or cultural "bias because of their identity as a member of a group without regard to their individual qualities." A tribally owned 8(a) must be a distinct legal, for-profit entity chartered under tribal, state or federal law. Its articles of incorporation or articles of organization must include a waiver of immunity. The 8(a) program includes special provisions for ANCs, corporations owned by federally-recognized tribes and Native Hawaiian Organizations. Unlike other 8(a)s, Tribal 8(a)s:

  • May own multiple 8(a)s, as long as each has a different primary industry designation;
  • May qualify as "small" without regard to their affiliates unless the SBA determines that a Tribal 8(a) has a substantial unfair competitive advantage within an industry, something the Small Business Administration (SBa), which administers the act, has so far never done;
  • May receive sole source, non-competitive contracts without regard to the $6.5 million (for manufacturing) and $4 million (for everything else) limits otherwise applicable to 8(a) firms;

Tribes automatically qualify as "socially disadvantaged," and there is a rebuttable presumption that individual Indians fall into this category. The same presumption does not apply, however, to "economically disadvantaged" status, which the regulations define as "those socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same business area who are not socially disadvantaged." In determining the degree of diminished credit and capital opportunities, The SBA considers assets and net worth and, for tribes, per capita income of members, the percentage of the local Indian population below the poverty level and the tribe's access to capital markets.

The 8(a) program has come under close scrutiny, with a particular focus on Alaska Native Corporations which, under the Alaska Native Claims Settlement Act, are automatically classified as both socially and economically disadvantaged. In 2011, Senator Claire McCaskill (D-Mo.) introduced S. 236, "A bill to eliminate the preferences and special rules for Alaska Native Corporations under the program under section 8(a) of the Small Business Act." While the bill focuses on Alaska Native Corporations, non-Alaskan tribal 8(a)s and National Congress of American Indians (NCAI) have strongly opposed it.

While the legislation has thus far been unsuccessful, future efforts are likely. In February 2011, the SBA amended existing regulations to "clarify" certain issues that had been the subject of complaints. In January 2012, the Government Accountability Office (GAO) issued a report, "Monitoring and Oversight of Tribal 8(a) Firms Need Attention," that acknowledged successes of the 8(a) program but also identified perceived continuing weaknesses, including alleged poor monitoring of subcontracts and improper use of affiliated firms to take over contracts from graduated companies. The GAO report and pressure from other competitors for federal contracts could lead to additional limitations on the program. The ANC and tribal 8(a) appear to enjoy considerable political support, however, and the 8(a) program continues to offer tribes excellent opportunities for economic diversification.

Godfrey & Kahn assists tribes in connection with business development, including creation of legal infrastructure (business entity codes, leasing ordinances and commercial codes), Small Business Act issues and evaluation of opportunities for diversification of tribal economies. For more information, contact Brian Pierson at 414.287.9456 or bpierson@gklaw.com.

Supreme Court to Hear Arguments in Indian Law Cases
Salazar v. Ramah
The United States Supreme Court will hear arguments in two Indian law cases this month. In Salazar v. Ramah Navajo Chapter, to be argued April 18th, the Ramah Navajo Chapter had sued the Secretary of the Interior and others (DOI) to recover the full contract support costs (CSC) associated with programs operated by the Chapter under self-determination contracts with the DOI pursuant to the Indian Self-Determination Act (ISDA). which mandates that government agencies fully fund ISDA contracts. The DOI later failed to fulfill its contract with the Ramah Chapter because Congress did not appropriate sufficient funds and capped appropriations at a level well below the CSCs. The DOI argued that the ISDA's provision that payments be "subject to appropriations" relieved the government of liability for CSC. Relying on the Supreme Court's 2005 decision in Cherokee Nation of Oklahoma v. Leavitt, the Tenth Circuit Court of Appeals disagreed, holding that the government was liable because annual CSC appropriations were sufficient to cover any individual contract. The "question presented" to the Supreme Court by the DOI is "Whether the government is required to pay all of the contract support costs incurred by a tribal contractor under the Indian Self-Determination and Education Assistance Act, 25 U.S.C. 450 et seq., where Congress has imposed an express statutory cap on the appropriations available to pay such costs and the Secretary cannot pay all such costs for all tribal contractors without exceeding the statutory cap."

Patchak v. Salazar
The Court will hear Patchak v. Salazar on April 24th. In that case, the Secretary of the Interior, pursuant to his authority under the Indian Reorganization Act (IRA), had accepted 147 acres of fee land in Wayland Township, Michigan, into trust on behalf of a tribe in 2009 for gaming purposes. Patchak, a neighboring land owner, sued under the Administrative Procedures Act, challenging the Secretary's decision on the ground that the tribe was not under federal jurisdiction as of the date the IRA was enacted, as required pursuant to the Supreme Court's 2009 decision in Carcieri v. Salazar. The district court dismissed, but the D.C. Circuit court reversed and reinstated Patchak's suit, holding that the negative effects of the proposed casino alleged by Patchak (loss of the area's rural character, diminished property value, loss of enjoyment of the agricultural land surrounding the casino site) gave him standing to assert the limitations on the Secretary's authority under the IRA. The tribe had argued that Patchak's suit was barred, citing provisions of the Quiet Title Act, which waives the immunity of the United States to permit suits challenging the government's title but explicitly states that such waiver does not apply to tribal trust lands. The D.C. Circuit, disagreeing with previous decisions of other federal appellate courts, held that the tribal lands exception did not apply because Patchak was not asserting his own title in the land. Patchak v. Salazar, 632 F.3d 702 (D.C. Cir. 2011).

Quiet Title Act, 28 USC 2409a(g): 12 year statute of limitations 28 USC 2409a(a): "This section does not apply to trust or restricted Indian lands."

The questions presented in the Secretary's petition are:

(1) "Whether 5 U.S.C. § 702 [APA] waives the sovereign immunity of the United States from a suit challenging its title to lands that it holds in trust for an Indian Tribe" and
(2) "Whether a private individual who alleges injuries resulting from the operation of a gaming facility on Indian trust land has prudential standing to challenge the decision of the Secretary of the Interior to take title to that land in trust, on the ground that the decision was not authorized by the Indian Reorganization Act, ch. 576, 48 Stat. 984."

The questions presented in the Tribe's petition are:

(1) "Whether the Quiet Title Act and its reservation of the United States' sovereign immunity in suits involving 'trust or restricted Indian lands' apply to all suits concerning land in which the United States claims an interest, 28 U.S.C. § 2409a(a), as the Seventh, Ninth, Tenth, and Eleventh Circuits have held, or whether they apply only when the plaintiff claims title to the land, as the D.C. Circuit held" and
(2) "Whether prudential standing to sue under federal law can be based on either (i) the plaintiff's ability to 'police' an agency's compliance with the law, as held by the D.C. Circuit but rejected by the Fifth, Sixth, Seventh, and Eighth Circuits, or (ii) interests protected by a different federal statute than the one on which suit is based, as held by the D.C. Circuit but rejected by the Federal Circuit."

If the D.C. Circuit's decision is left intact, attacks on trust acquisitions could multiply. The issues before the Court relate primarily to Patchak's standing and the federal government's sovereign immunity under the Quiet Title Act. It is possible, however, that the Court will in some manner also address the applicability of its 2009 decision in Carcieri to the tribe's newly acquired lands. The Match-E-Be-Nash-She-Wish Band was re-recognized through the federal acknowledgement process in 1998. While the tribe clearly satisfies the standard that the Secretary established in his 2010 determination to take land into trust for the Cowlitz tribe, to determine which tribes were "under Federal jurisdiction" as of June 18, 1934 for Carcieri purposes, that standard is only beginning to be tested in the courts.

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