0001 1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA 2 ELOUISE PEPION COBELL, et al., : Civil Action 96-1285 3 : Plaintiffs : 4 : v. : Washington, D.C. 5 : DEPARTMENT OF THE INTERIOR, : Monday, May 14, 2007 6 et al. : : 7 : Defendants : 3:00 p.m. 8 - - - - - - - - - - - - - - - - x TRANSCRIPT OF PREHEARING CONFERENCE 9 BEFORE THE HONORABLE JAMES ROBERTSON UNITED STATES DISTRICT JUDGE 10 APPEARANCES: 11 For the Plaintiffs: DENNIS GINGOLD, ESQUIRE LAW OFFICES OF DENNIS GINGOLD 12 1275 Pennsylvania Avenue, N.W. Ninth Floor 13 Washington, D.C. 20004 (202) 662-6775 14 ELLIOTT H. LEVITAS, ESQUIRE 15 WILLIAM E. DORRIS, ESQUIRE KILPATRICK STOCKTON, L.L.P. 16 1100 Peachtree Street Suite 2800 17 Atlanta, Georgia 30309-4530 (404) 815-6450 18 WILLIAM AUSTIN, III, ESQUIRE 19 KEITH HARPER, ESQUIRE KILPATRICK STOCKTON, L.L.P. 20 607 14th Street, N.W. Suite 900 21 Washington, D.C. 20005 (202) 585-0053 22 23 DAVID C. SMITH, ESQUIRE KILPATRICK STOCKTON, L.L.P. 24 1001 West Fourth Street Winston-Salem, North Carolina 27101 25 (336) 607-7392 0002 1 For the Defendants: ROBERT E. KIRSCHMAN, JR., ESQUIRE JOHN WARSHAWSKY, ESQUIRE 2 MICHAEL QUINN, ESQUIRE J. CHRISTOPHER KOHN, ESQUIRE 3 U.S. Department of Justice 1100 L Street, N.W. 4 Washington, D.C. 20005 (202) 307-0010 5 JOHN STEMPLEWICZ, ESQUIRE 6 Senior Trial Attorney U.S. Department of Justice 7 Commercial Litigation Branch Civil Division 8 Ben Franklin Station P.O. Box 975 9 Washington, D.C. 20044 (202) 307-1104 10 GLENN D. GILLETT, ESQUIRE 11 U.S. Department of Justice Commercial Litigation Branch 12 Civil Division P.O. Box 875 13 Ben Franklin Station 14 Washington, D.C. 20044 15 (202) 514-7162 16 17 Court Reporter: REBECCA STONESTREET 18 Official Court Reporter 19 Room 6415, U.S. Courthouse 20 333 Constitution Avenue, N.W. 21 Washington, D.C. 20001 22 (202) 354-3249 23 24 Proceedings reported by machine shorthand, transcript produced 25 by computer-aided transcription. 0003 1 P R O C E E D I N G S 2 COURTROOM DEPUTY: This is Civil Action Number 96-1285, 3 Cobell et al. versus Gover. 4 If counsel who will be arguing would please identify 5 themselves for the record. 6 MR. KIRSCHMAN: Your Honor, Robert Kirschman, 7 Department of Justice, for defendants. Also arguing today on 8 the motion to vacate the 2001 consent order will be 9 John Warshawsky, and arguing the attorneys' fees issues will be 10 Michael Quinn. Both gentlemen are with the Department of 11 Justice. 12 MR. GINGOLD: Your Honor, my name is Dennis Gingold. 13 I'm counsel for plaintiffs. With me is Keith Harper of 14 Kilpatrick Stockton; Bill Dorris, Kilpatrick Stockton; Elliott 15 Levitas, Kilpatrick; Jeffrey Rempel, our expert; and David Smith 16 of Kilpatrick Stockton. 17 THE COURT: Okay. In my organization of this 18 proceeding today, we have three basic topic headings to cover, 19 the fee issues, the consent order issue, and the October 20 hearing. 21 I want to start with the fee issue. I've lost my 22 innocence in this case. I don't think we're going to put it 23 behind us. The purpose of my short omnibus order recently was 24 to try to put all this behind us. I have to say, I clearly, 25 obviously, did not find in the morass that is the docket of this 0004 1 case all of the memoranda and objections to fees that were 2 lurking there. 3 But I have to say at the same time that I'm frankly 4 disappointed in both parties on this particular issue. I had, 5 as you all know, two ex parte meetings, one with plaintiffs, one 6 with the defendants, to try to orient myself in this case. And 7 I was reminded by plaintiffs of these outstanding fee matters, 8 and resolved to take them up, discuss them -- I thought I 9 discussed them with defendants, and the discussion we had was 10 kind of a shrug on the part of the defendants, which led me into 11 the erroneous belief that the defendants really weren't making a 12 substantive opposition to the fee petitions. 13 Now, obviously, there is a very substantive set of 14 oppositions to it. And again, as you all know, these fee 15 matters can eat up an enormous amount of time and energy on 16 everybody's part, and the Court of Appeals requires detailed 17 rulings on these subjects. And I suppose what I've done is to 18 sentence myself to sit down on a couple of weekends and crawl 19 through these billing statements. I don't really want to do 20 that, but it appears that I have to do it. 21 I asked the parties to respond on the defense's motion 22 for reconsideration. I asked the plaintiffs to respond to a few 23 points. And let me tell you where I am so far on this subject. 24 Unless I am very much mistaken, the plaintiffs have put in 25 billing statements of something like 83 hours, or $28,000, just 0005 1 for scheduling the December 20th, 2002 deposition, at which the 2 claim of privilege was made that was later held by 3 Judge Lamberth to be improper. 4 They can't claim that money here. That was before 5 these events happened, and I can't understand why the plaintiffs 6 made that claim. There may be other dollar figures in this bill 7 for actually taking that December 20th, 2002 deposition. Again, 8 I can't understand why that was billed. 9 There is a substantial amount of money claimed for the 10 Singer deposition. The relationship of the Singer deposition to 11 the Erwin deposition escapes me. 12 And there's a very substantial claim made for preparing 13 something called a "Report on the Status of the Evidence," that 14 wasn't asked for, and I don't know how it can be billed under 15 Judge Lamberth's order, which allowed "reasonable fees and 16 expenses incurred in making plaintiffs' motion to compel the 17 deposition of Donna Erwin, to respond to the question as to 18 which privilege was improperly asserted, and as a result of 19 having to re-depose Ms. Erwin." 20 So those are at least four elements of the claims in 21 the Erwin deposition that I'm going to disallow, and there's a 22 substantial amount of money involved in them. 23 There are a number of other objections that have been 24 made by the government that I'm going to overrule. They've 25 objected to Mr. Rempel's fee of $225. It's too late in the day 0006 1 for me to mess around with that. Judge Lamberth approved that 2 on previous occasions. I don't care what particular work 3 Mr. Rempel was doing in this area or in the Sapienza area. His 4 fees, the rate of his fees, have been previously approved. I'm 5 not going to change that. 6 Nor am I going to sustain the government's objection 7 generally to the scope of the second Erwin deposition, or to the 8 fact that parts of the deposition were taken much later in 2004. 9 I understand that Judge Lamberth sua sponte ordered that. 10 Nor am I going to get into deciding whether it was 11 proper for both Mr. Brown and Mr. Gingold to review a motion to 12 compel, or to what I consider frankly kind of flyspeck 13 objections like Mr. Brown's spending two and a quarter hours 14 reviewing a ruling of the Court, or to time spent preparing the 15 fee petition, with one exception: 16 The latest filing made by the plaintiffs today, I 17 think, indicates that they've cranked up the clock and there's 18 another $129,000. No, sir. That time is not going to be 19 compensated, not out of this Court. 20 The only reason we're compensating the earlier time is 21 because it was all done under the rubric of Judge Lamberth's 22 order. But I think responding to this motion for 23 reconsideration, frankly, counsel, is a kind of a self-inflicted 24 wound. You've made some very dramatic over-claims for fees, and 25 having to respond to that motion for reconsideration, I do not 0007 1 consider compensable. 2 Now, on the Sapienza affidavit, that's a much broader 3 order of Judge Lamberth. The order allows "reasonable expenses 4 incurred by plaintiffs as a result of opposing the claims set 5 forth in the Sapienza affidavit." That is a much broader fee 6 award, concept of a fee award, than was the Erwin deposition. 7 But I think the government is correct that no fees 8 should be granted for work performed in June and July 2000, 9 before the third motion for summary judgment was even filed, 10 that contained the affidavit of Sapienza that was the subject of 11 all of this Sturm and Drang. 12 And I think the government is correct that the 13 plaintiffs cannot properly collect fees that were rejected on 14 prior occasions concerning efforts to hold the Secretary and the 15 Assistant Secretary in contempt, or for the Mona Infield matter. 16 I am not worried about inconsistencies between the bills of 17 Mr. Gingold, Mr. Harper, Mr. Brown. 18 I am, frankly, quite concerned about the assertion made 19 in the government's motion, and I want a specific response from 20 the plaintiffs. I don't think -- now, you're going to tell me I 21 got this a long time ago, and if I did, then I've missed it 22 again. But I don't think I've had a response yet to the 23 suggestion in the government's "Corrected Objections to 24 Statement of Fees and Expenses," filed on April 26th, that 25 Mr. Gingold rewrote time entries to fit the Sapienza fee award. 0008 1 I'm referring to the material at pages 11 and 12, and footnote 2 13 of the defendant's corrected objections. 3 Mr. Gingold will stand up and tell me that I'm wrong, 4 that he did respond to that, and if so, I want to know what the 5 response was. Because that I frankly find a rather disturbing 6 charge. 7 Your nickel, Mr. Gingold. 8 MR. GINGOLD: Thank you, Your Honor. We did respond. 9 There is a footnote response, and let me see if I can -- in the 10 brief that we filed on Thursday. 11 THE COURT: Well, a lot of things were filed on 12 Thursday, Friday, and today. 13 MR. GINGOLD: No, no. I'm just trying to explain this, 14 and I will find it. 15 Your Honor, what I'm looking for in here, and which I 16 expect to find shortly, is a statement dealing with the fact 17 that an issue like this was raised before in other fee 18 objections by the government. And the judge responded -- Judge 19 Lamberth responded with the statement that, to provide clarity 20 to enable the Court to understand what the issues are was 21 satisfactory. 22 And in fact, if -- I'm still looking while I'm 23 speaking, Your Honor. But in fact I went back through my actual 24 time records, just to -- the original diaries, just to determine 25 what is in there. There is nothing, Your Honor, that is at all 0009 1 inconsistent with what is in the billing records. And in fact, 2 there is probably, in all the meetings there referenced, Justice 3 Department lawyers and others were present, including Treasury 4 people. So they know the issues were specifically relating to 5 those particular matters. 6 Where the allegation of, I guess, a manufactured time 7 record is, is I think specifically with respect to matters 8 within the five specifications for the show cause order that was 9 dismissed by the Court of Appeals. The specifications had 10 broad -- were very broad with regard to conduct and 11 representations which we thought this Court did not want us to 12 get into, and we did not. But among representations were 13 representations with regard to the GAO settlements issue. 14 That's the reason they were within the five specifications that 15 we identified. 16 What was not -- they're actually within the first four; 17 the fifth specification was the IT security. The other four 18 dealt with conduct during certain periods of time, and they were 19 broad scope conduct with regard to the misconduct of defendants. 20 The information was included within the fee petition 21 for the show cause motion. The judge had not made any decisions 22 with regard to any of those. The language that was changed was 23 only with regard to certain -- oh, as a matter of fact, Your 24 Honor, it's on footnote six of the brief that we filed on 25 Thursday. 0010 1 THE COURT: Well... 2 MR. GINGOLD: Sorry, it's -- the reference, Your Honor, 3 is under 407 F.Supp 2d, 140, 155, where the statement in the 4 decision of this Court is, "The Court finds defendants' 5 objections to plaintiffs' practice of transferring records from 6 one medium to another and clarifying records to facilitate 7 judicial review meritless." That's 407 F.Supp 2d 140, 155. The 8 same objections were made in that particular fee objection that 9 were made in other fee objections. 10 We had explained to the Court -- because in the past, 11 Your Honor, at our first fee application, one of the principal 12 objections of the government was that we were insufficiently 13 clear. And the Court indicated there was a lack of clarity with 14 regard to the time that was submitted. As a matter of fact, in 15 that same application, I think Mr. Holt had a significant amount 16 of time that was denied because of the lack of clarity. 17 Subsequent to that, in fee applications, we attempted 18 to make it clear in response to the objections of the government 19 and Judge Lamberth's points. Mr. Holt, I think in the 20 subsequent applications, chose to continue to report the same 21 type of information that was directly in his diaries, and I 22 think for the most part, much of that was denied for lack of 23 clarity. The judge -- the Court then pointed out that the 24 clarity was helpful to enable the Court to understand the issue. 25 Whatever was identified was identified with regard to 0011 1 the points made by Judge Lamberth with regard to the need for 2 clarity. The matters that were recorded were matters that were 3 related exclusively to the GAO issue and those fees. 4 And as we pointed out, in part in objecting to the 5 inconsistency argument, what we have a tendency to do because we 6 are dealing with a number of pressing issues, is go from one 7 conference, one meeting, to one issue, to another brief, and 8 frequently write coded entries, entries that relate to that 9 matter, if we are able to write them down at all because of the 10 time constraints that we have. Because what we try to do is 11 contemporaneously record our time, which is what we represented 12 that we did. 13 So we had a situation where this issue was raised 14 before, and in the raising of that situation, felt it was 15 appropriate - and Judge Lamberth had on other occasions accepted 16 that as appropriate - to make the clarifications that were 17 identifiable specifically to the issue, but made clarifications 18 in order to support it. 19 Those clarifications were simply clarifications. That 20 was vigorously argued by the government that was improper, and 21 as a matter of fact, suggested that there was a certain amount 22 of dishonesty associated with it. Judge Lamberth found that 23 that was without merit. 24 THE COURT: Okay. Government want to be heard on that 25 particular point, Mr. Quinn? 0012 1 MR. QUINN: Good afternoon, Your Honor. I would not 2 have, I think, much to add beyond the four corners of the brief. 3 I think that the thrust of the government's argument and the 4 concern here is that the government not be billed twice for the 5 same work. 6 Plaintiffs in their response brief seem to make the 7 assertion that it doesn't matter if they billed twice if it was 8 billed toward a contempt action; and now, because they didn't 9 recover on that fee petition, can re-bill it here. 10 THE COURT: Are you saying that, Mr. Gingold? 11 MR. GINGOLD: It doesn't matter if it can fit in both 12 categories, Your Honor. It matters -- if we were paying, we 13 would have no right to bill and collect for it. If the matter 14 is within the scope of two other matters -- for example, Your 15 Honor, let me give you an illustration. I don't want to talk 16 about this too much, because we're dealing with -- 17 THE COURT: I want to talk about it a lot. 18 MR. GINGOLD: Okay. We're dealing, for example, with 19 the Enfield situation. When we sat down and we talked, and both 20 the government and we accepted the Special Master as the 21 arbitrator in that dispute, the Special Master sat down with us 22 specifically ex parte, and with the government ex parte, to 23 resolve it in what he felt was a mutually acceptable manner. 24 We raised with the Special Master matters that we had 25 filed with regard to contempt, the show cause motion that was 0013 1 vacated by the Court of Appeals, matters that were raised in 2 other issues. And the Master said, "I don't know where this is 3 going to come out. Put them in and I will decide how to resolve 4 it." 5 We explicitly had that discussion with the Master, and 6 he said he wasn't going to make any decisions on it. He said it 7 was appropriate to put it in, and we did, Your Honor. How he 8 was going to come out with it, we have no idea. If we were paid 9 for it, we wouldn't have submitted it. But we had that specific 10 discussion before even filing that, Your Honor. 11 THE COURT: All right, look. I said I want to talk a 12 lot about it, but actually it won't bear a lot of discussion. 13 Here's the ruling on that point: 14 I'm not going to go back and undo what Judge Lamberth 15 has said about your rewriting time records, not in the past. 16 But from this point forward, a time record is a time record. 17 It's not something that is embroidered, added to, subtracted 18 from, categorized, et cetera, later on. A time record is a time 19 record. If it's sufficiently clear, you may collect on it. If 20 it's not, you won't. But there's not going to be any -- from 21 this point forward, don't come to me with any edited time 22 records. 23 Second: With respect to any time that you have 24 previously asked to be reimbursed and have been rejected, take 25 it out of this bill. I don't care whether you can re-categorize 0014 1 it or not; take it out of this bill. 2 MR. GINGOLD: Your Honor? 3 THE COURT: Yes. 4 MR. GINGOLD: One of the bills that we submitted and 5 were paid, for example, was the interim fee award for equal 6 access to justice. The Court denied time, not because it was 7 denied on the merits, but because it didn't fit within the scope 8 of that fee award. And he explicitly stated that time could be 9 resubmitted in other matters. 10 THE COURT: If you're going to resubmit that time, flag 11 it carefully so that we can all understand which hours you're 12 talking about. 13 MR. GINGOLD: But we had situations like that. For 14 example, in each fee award, the Court indicated that time did 15 not fit within that category, it wasn't within the scope of that 16 award. Because sometimes the orders weren't as clear as we 17 would have liked. And we submitted the fees, and decisions were 18 made not on the merits, but with respect to what the Court felt 19 were the scope of the particular award. 20 Therefore, what the Court said is, within his scope it 21 wasn't appropriate. He did not say it wasn't appropriate to 22 otherwise submit. And Your Honor, that is a situation in every 23 one of the contentions made by the government. 24 THE COURT: All I'm saying is, if you're going to 25 resubmit time that has previously been submitted and rejected, 0015 1 flag it so we that know which is which. 2 MR. GINGOLD: Yes, Your Honor. 3 THE COURT: Now, just let me review the bidding here. 4 On the Erwin deposition, no fees for the December 20th, 2002 5 deposition, either scheduling it or taking it; no fees for the 6 Singer deposition, anything having to do with the Singer 7 deposition; no fees for the report on status of the evidence. 8 As far as this Laffey rate thing is concerned, I 9 understand the government's objection to your claiming the later 10 Laffey rate for preparing a fee petition at a later time than it 11 was expected. But by the same token, if they had prepared it 12 earlier, they arguably would have had to pay it earlier. So I'm 13 not worried about that. 14 I'm not worried about Rempel's fee. I'm not worried 15 about the scope of the Erwin deposition, or the length of it, or 16 even that it took place in October 2004. 17 I'm not worried about two or three people reviewing the 18 same material, or inconsistencies in the time between who -- you 19 know, it doesn't bother me if one person claimed time meeting 20 with -- if A claims time meeting with B and C, and there's no 21 claim by B and C for the same time. Life isn't perfect and 22 neither is billing, and I'm not going to worry about that. 23 Nor, except for the latest claim for fees relating to 24 the preparation of a fee petition, am I going to worry about 25 that, because that's classically and typically compensable. 0016 1 As far as Sapienza concerned, no fees for work 2 performed in June and July of 2000. And, modified by the 3 discussion I just had with Mr. Gingold, no fees rejected on 4 prior occasions for the efforts to hold the Secretary and the 5 Assistant Secretary in contempt unless that can be tied to the 6 Sapienza thing, or for the Mona Infield matter. 7 Now, I really -- I think it's in the plaintiffs' 8 interests to resubmit your bill with those rulings in mind, 9 because otherwise I'm going to crawl through it and do it, and 10 you may lose more that way than you would if you do it yourself. 11 Okay, next. Mr. Quinn, you want to be heard? 12 MR. QUINN: If I may, Your Honor. As I'm keeping tabs 13 on my list with respect to the fee issue, Your Honor, the one 14 additional thing with respect to the Sapienza matter. 15 Plaintiffs had submitted time claims with respect to a number of 16 motions that in fact they had lost in the course of -- 17 subsequent to the Sapienza declaration attached to the partial 18 summary judgment motion. 19 In their time requests, a request for fees in 20 connection with a brief in opposition to the government's motion 21 to withdraw the partial summary judgment motion that in fact the 22 Court granted the government's motion to withdraw that motion. 23 So they had not succeeded on that motion. The practice 24 of the Court heretofore on fee requests have been, if a 25 particular filing had not been at least successful, as a 0017 1 premise, the party would not be entitled to recover fees for 2 that. 3 Plaintiffs had also made a motion to amend a motion for 4 contempt, or to supplement the motion for sanctions with respect 5 to Sapienza. That was denied by the Court as well, yet there 6 are fee requests as part of their application. So that's one 7 subset of the objections, Your Honor, that I would still say is 8 open and unresolved. 9 THE COURT: Well, let me make sure that I understand 10 what you're talking about. I've already said that the fee award 11 or the awarding language of Judge Lamberth on this fee question 12 is "reasonable expenses incurred by plaintiffs as a result of 13 opposing the claims set forth in the Sapienza affidavit." 14 That's pretty broad language. That covers a lot of territory. 15 Now, are you telling me that the matters that you've 16 just identified don't have anything to do with opposing the 17 claims set forth in the Sapienza affidavit, or just that they 18 were motions that were denied? 19 MR. QUINN: Well, in the broad sense, they applied to 20 that summary judgment motion. The government subsequently -- 21 the government had made three Phase II partial summary judgment 22 motions, then there was a changeover in counsel for the United 23 States, and a motion was made to withdraw all three pending 24 summary judgment motions, including the one that had the 25 attached Sapienza declaration/affidavit. 0018 1 Plaintiffs opposed withdrawal of the motion for partial 2 summary judgment. The Court denied that, and granted the 3 government leave to withdraw the motion. And now there are fees 4 being claimed on behalf of that effort to block -- to withdraw 5 the motion that was subsequently granted by the Court. 6 In the broadest sense, it's related to the subject 7 matter, but I don't believe it is responding to any injury or 8 harm or prejudice related to the Sapienza declaration itself. 9 THE COURT: All right. I hear that objection. I'm 10 going to overrule it, and I'm going to allow their fees on that. 11 MR. QUINN: Thank you, Your Honor. 12 THE COURT: All right. 13 MR. GINGOLD: Your Honor, may I? 14 THE COURT: Sir? 15 MR. GINGOLD: Your Honor, there's another matter that I 16 would just like to ask the Court to consider before we adjourn 17 today, and that deals with the notice we filed -- 18 THE COURT: I saw that. File a Title VII case. It 19 doesn't belong in this case. 20 MR. GINGOLD: Your Honor, we have -- 21 THE COURT: It doesn't belong in this case. 22 Now, the consent order -- there is such a thing as 23 obstruction of justice, Mr. Gingold. If you think you've got 24 something that amounts to obstruction of justice, go see the 25 United States Attorney or give me an ex parte affidavit. 0019 1 Otherwise, I'm through with this business of sanctions and 2 counter-sanctions and retaliation and people yelling at each 3 other. I am through with it, period. 4 Yes, sir, you want to be heard again? That's a nice 5 smile, Mr. Gingold. Keep it on your face. 6 Consent order? 7 MR. KIRSCHMAN: Mr. Warshawsky will argue that for the 8 government, Your Honor. 9 THE COURT: All right. Mr. Warshawsky, I have to tell 10 you a couple of things here. I'm not writing on a blank slate. 11 Consent order means consent order. The government consented to 12 this at some point. And the government had the burden, in 13 filing this motion to vacate it, of demonstrating that -- doing 14 something to demonstrate that the IT failures that caused this 15 subject in the first place have been remedied. And I don't know 16 that you've made any showing on that point, nor do I quite 17 understand where the prejudice to the government lies with 18 keeping it in effect. 19 If you would like to address yourself to those two 20 positions, I would like to hear it. 21 MR. WARSHAWSKY: Yes, I would be glad to. Thank you, 22 Your Honor, and may it please the Court. 23 The government did in fact consent; Interior 24 specifically consented to this order back in December 2001. And 25 when a party consents to an order, it does so given a certain 0020 1 given set of facts and the state of the law as it is. 2 The consent order was entered in response, or following 3 shortly, the issuance of a temporary restraining order which 4 this Court entered not long after the Special Master had issued 5 his report concluding that Individual Indian Trust data was at 6 risk because of deficiencies in the IT security of various 7 systems. 8 When the government entered into the consent order, the 9 law had not evolved as it has in the past few years. And in the 10 Court's April 27th order scheduling this matter for hearing, you 11 asked us to specifically address the continuing role of the 12 Court in light of the resignation of the Special Master, and, I 13 would suggest more significantly, in the wake of Cobell XII, 14 Cobell XIII, and Cobell XVIII. Because these three decisions, 15 particularly Cobell XII and Cobell XVIII, since they are 16 specific to IT security, do present the Court with a, I would 17 suggest, a new legal framework for reviewing this Court's 18 jurisdiction and in general judicial review of IT security at an 19 agency. 20 Within about a year's time after the entry of the 21 consent order, Congress passed the FISMA statute as part of the 22 E-Government Act. And FISMA, with all due respect to the 23 plaintiffs, who characterize FISMA as a reaffirmation of 24 previously existing duties, Congress clearly viewed FISMA as a 25 broadening and strengthening of IT security law. And that's 0021 1 established or that's confirmed by a review, for example, of the 2 legislative history cited at pages four and five of our opening 3 brief, and reiterated in our reply brief. 4 The FISMA statute did, for one thing, establish that it 5 is the agency head who has the responsibility to determine what 6 types of risks are acceptable in operating IT security systems. 7 We did not argue, as the plaintiffs indicate in their 8 opposition, that FISMA initially established the responsibility 9 of an agency head to have -- made an agency head responsible for 10 IT security. IT security was an agency head's responsibility 11 before that. 12 But FISMA confirmed that going forward. The agency 13 head permanently would be responsible for making risk-based 14 assessments of what would be acceptable to operate a system. 15 Specifically, the statute talks about the agency head making 16 determinations about information security protections 17 "commensurate with the risk and magnitude of the harm resulting 18 from unauthorized access, use, disclosure, disruption, 19 modification, or destruction of information." That's 44 USC, 20 Section 3544(a)(1)(A). 21 FISMA also placed the agency's determinations under a 22 specific oversight structure. They're reviewable by, first of 23 all, the agency reports to the Office of Management and Budget. 24 OMB reports to Congress. The agency inspector general has an 25 oversight role. And as the Cobell XVIII Court confirmed, 455 0022 1 F.3d at 313 to 314, the one thing Congress did not do when it 2 established FISMA is put in place a judicial role for assessing 3 IT security. 4 Now, the Cobell XVIII Court, in discussing that, said 5 this is not a FISMA case, if indeed such animal exists, or some 6 language like that. And what's important about that is, what 7 this Court's role is, this is a case brought pursuant to the 8 APA, to seek enforcement of the government's responsibilities 9 under the 1994 act. It's not an action under the APA attacking 10 Interior's general IT security. 11 It's difficult. I mean, I think there is some 12 confusion -- there can be some confusion about where the limits 13 are for judicial oversight in this case, and Cobell XVIII Court 14 recognized that, and I think reconciled them. 15 What this Court's proper role, I would submit, is, if 16 plaintiffs were to come in with a set of facts demonstrating an 17 imminent threat to the data necessary to prepare the historical 18 accounting, then this Court has the authority to issue a 19 temporary restraining order followed by a preliminary 20 injunction, perhaps a final and permanent injunction. 21 But that's where the Cobell XVIII Court deviated from 22 the general IT oversight role, which the consent order really 23 contemplated. And, you know, if we all had the wisdom to 24 project five and a half years down the road -- first all, I 25 can't second-guess what happened back then. I don't think 0023 1 anybody contemplated a five-and-a-half-year process. 2 But what I do know is that in 2003 and 2004, this Court 3 entered injunctions intended to supersede the consent order. 4 The consent order was stayed by the Court because the Court 5 considered the consent order's process to be a failed process. 6 The plaintiffs have never endorsed the consent order. Even in 7 their opposition to our motion, they point to the fact that the 8 consent order wasn't their consent order. 9 And the 2005 hearing -- 10 THE COURT: How did it get to be called a consent order 11 if it wasn't consented to? 12 MR. WARSHAWSKY: Oh, it was consented to at the time by 13 the Interior. But my point, Your Honor -- 14 THE COURT: That's usually the basis of a consent 15 order. 16 MR. WARSHAWSKY: Well, whatever. I will not go in -- I 17 will plead ignorance on the process for naming the order that 18 was entered. But the consent order certainly was one that the 19 plaintiffs have never endorsed, and -- in 2003 and 2004. And 20 then finally again in 2005, with the 59-day evidentiary hearing, 21 the Court determined that the consent order process was flawed, 22 broken, couldn't be utilized anymore. 23 And it's at 394 F.Supp 2d at 170. The 2005 hearing, 24 the Court stated that that hearing was to assess current, 25 current IT security. And having gone through that process, for 0024 1 those of us who went through it, a tortuous 59-day process, 2 during which time the government produced roughly five million 3 pages of documents, many of which were highly sensitive 4 regarding IT security, having gone through that entire process, 5 and the Court entered what it considered the appropriate 6 injunction to replace the consent order, the Court of Appeals of 7 course last year vacated that consent order -- or I'm sorry, 8 vacated the order entered by Judge Lamberth following the 2005 9 hearing. 10 So in a nutshell, Your Honor, here we are five and a 11 half years later with a completely different set of facts; and 12 completely new, more importantly, new legal framework for 13 determining what levels of security are adequate. 14 The consent order, for example, Your Honor, contains no 15 standard that the then-Special Master was to apply in assessing 16 whether IT security was adequate. It simply said, the 17 government, in essence, either submitted information to show 18 that systems did not house or access Individual Indian Trust 19 data, and therefore truly were outside the scope of the case. 20 Or, if they did house or access Individual Indian Trust data, 21 the Special Master reviewed them and made his determination 22 whether the security was adequate. 23 Following FISMA, the National Institute of Standards 24 and Technologies, NIST, was given much more -- a much greater 25 role in terms of being able to mandate standards for the 0025 1 government. And so, as we referenced in our brief, a number of 2 standards came out: FIPS 199, and I'm flipping forward here, 3 which sets out standards for security categorization; FIPS 200, 4 minimum security requirements. Those both came out in 2004 and 5 2006, respectively. 6 Special Publication 800-53, which sets out recommended 7 security controls. It's now mandatory for the government 8 because of Roman numeral page five of FIPS 200. That came out 9 in February 2005. 10 Special Publication 80-37 came out in May 2004. That's 11 the current guidance on what's been referred to as the 12 certification and accreditation process. That's the process the 13 agency is required to go through to assess what types of 14 information are on its systems, what types of risks exist for 15 that information, and ultimately to make a determination as to 16 whether adequate security exists and whether the agency -- 17 whether the risks remaining are acceptable. 18 As the Court I'm sure is aware, the D.C. Circuit wrote 19 about it, this Court has written about it in the past. I think 20 it's common knowledge: No connected operating computer system 21 is 100 percent safe from any form of, you know, manipulation, 22 whatever. If you operate a computer system, there's always the 23 possibility somebody is going to break into it, and it very well 24 could be from the inside as well. The threats, frankly, from 25 employees are often greater than the threats from the outside 0026 1 world. 2 But the question is, in the final analysis, who is the 3 arbiter about what those risks -- whether the risks of being 4 disconnected -- or the risks of being connected are great enough 5 to justify disconnection? The D.C. Circuit in 2006 reviewed 6 this Court's analysis of that, and concluded that it was highly 7 skeptical that the public would benefit from disconnected IT 8 systems. 9 One thing I do want to clarify or confirm to the Court. 10 In asking that this Court vacate the consent order, Interior is 11 not today seeking permission from this Court to reconnect 12 systems, and they do not currently intend to reconnect the 13 currently disconnected bureaus or offices. 14 They do want to continue going through the process of 15 evaluating the systems to assess risks. And, you know, the 16 Court obviously is aware, for example, the declarations that the 17 plaintiffs filed in their opposition. I mean, that's the kind 18 of information an agency considers in assessing whether to go 19 ahead and allow a system to be connected to the Internet. 20 The consent order remains a cloud or an impediment to 21 Interior being able to complete the process, which they are 22 required to do under FISMA, and I would submit they should be 23 allowed to do in light of the last few appellate decisions on 24 this issue. 25 THE COURT: There was an IG report on the state of IT 0027 1 security that was issued in March. I don't think you've filed 2 that with the Court, have you? 3 MR. WARSHAWSKY: We have not, Your Honor. 4 THE COURT: What does it say? 5 MR. WARSHAWSKY: Your Honor, I'm not -- first of all, 6 not conversant with its details. I don't think I would feel 7 comfortable reducing it to a few sentences. And frankly, you 8 know, it is a matter that we consider to be sensitive. 9 THE COURT: Well, look. I think everyone understands 10 that the consent order in its current form doesn't make a lot of 11 sense. I mean, it makes references to a Special Master that 12 doesn't exist anymore. It all has to do with the functioning of 13 the Special Master that doesn't exist. 14 And I think you've just clarified for me that its only 15 real effect is that it keeps four bureaus offline. That's about 16 it. And you call it a cloud or a -- 17 MR. WARSHAWSKY: An impediment. 18 THE COURT: An impediment. 19 MR. WARSHAWSKY: Because ultimately, Your Honor, if 20 Interior does what it's statutorily required to do and goes 21 through the process of determining when, for example, the Bureau 22 of Indian Affairs is ready to be reconnected to the Internet, it 23 still can't do that as long as the consent order is in place. 24 And the only way we can get past the consent order is 25 to ask the Court to determine that that security -- that the 0028 1 security levels in, for example, the BIA are now adequate to 2 allow Internet connectivity. 3 I would submit, though, Your Honor, in light of the 4 many authorities that I've cited, including Cobell XVIII, there 5 isn't a basis for this Court to do that. It would be -- this 6 Court doesn't have a standard to make that judgment. What the 7 Court can do is, if indeed the data necessary to prepare the 8 historical accounting were at risk, then the plaintiffs can run 9 in and ask for a TRO. And that is, after Cobell XVIII, I 10 believe, what the proper judicial role is: To protect the data 11 for the historical accounting, not to look at the current state 12 of IT security at BIA and decide whether it's good enough for 13 connection to the Internet. 14 THE COURT: Okay. Who is going to respond to this from 15 the plaintiffs? 16 MR. SMITH: I am, Your Honor. 17 THE COURT: Mr. Smith? 18 MR. SMITH: Your Honor, if I could point at one thing. 19 You were looking for a response to Mr. Gingold's argument, and 20 apparently it's in footnote 54 of plaintiffs' response to the 21 Court's order dated April 27th. Mr. Gingold could not find 22 that. 23 Your Honor, I think you hit the nail on the head. This 24 is a consent order. They agreed to this back five and a half 25 years ago. And that has extraordinary implications for this 0029 1 case. Number one, it shows that they waived all defenses. If 2 they had an argument back in 2001 that, "Look, this is the 3 Secretary's role, it's not the Court's role," they had the 4 opportunity to make that argument back then. They did not. 5 The second implication from the fact that it's a 6 consent order is the fact that it's enforceable by this Court. 7 We cited the Frew case, Frew vs. Hawkins, which actually Cobell 8 XII relied on to some extent. In Frew, they said just because 9 it's a consent order doesn't mean we can't enforce it. Cobell 10 XII relied on Frew when they went and said this is a court of 11 equity which has the right to enforce Trust obligations a 12 century old, and also has the right to, or the equitable 13 authority to enforce a consent decree. 14 Third and perhaps most importantly, it changes the 15 standard. We've heard Mr. Warshawsky talk about the need for us 16 to come in and make a preliminary injunction or make a showing 17 of a preliminary injunction that we have to show irreparable 18 harm. But that's not the circumstance anymore when they consent 19 to it. It's their obligation to come into this court and show 20 changed circumstances of some sort. And they haven't done that 21 in this case, Your Honor. 22 When they originally -- 23 THE COURT: FISMA doesn't change the circumstances? 24 MR. SMITH: It does not, Your Honor. Because 25 everything that they rely on in FISMA was an existing obligation 0030 1 at the time of the consent order. 2 Your Honor, interestingly, on I believe it's page 15 of 3 their original brief, they referred to FISMA as being a 4 consolidation of existing provisions. And that's basically what 5 it is. Number one, they argue that, look, the Secretary, when 6 FISMA was enacted, suddenly had these obligations to manage and 7 assure adequate security. You look back through the prior 8 statutes, the Paperwork Reduction Act, 44 USC, Section 3506, it 9 was the obligation of the Secretary to implement and enforce 10 standards on security. 11 The IT Reform Act, which was I believe 1996, several 12 years prior to the consent order, the Secretary had that 13 obligation. OMB Circular A-130, which is largely unchanged in 14 its current status, from the time of the 2001 order, imposed on 15 the Secretary this same obligation. So that's an obligation 16 that they had at the time of the consent order, and one that has 17 not changed. 18 The other thing they refer to is the argument that, 19 look, suddenly OMB is required to create these standards, and 20 must look to NIST for guidance and then promulgate standards 21 that the agency had. 22 Your Honor, those are obligations that existed back in 23 2001. There's nothing new in FISMA. The IT Reform Act, again, 24 in 1996 said the OMB must develop standards based on NIST. The 25 Computer Act of 1987, one of the original standard -- or 0031 1 statutes that Congress enacted regarding IT security, once again 2 referred to the predecessor to NIST, which said you must look at 3 the National Bureau of Standards, I believe I was called at that 4 time. The Department of Commerce must look to that and enact 5 guidance for the secretaries. And all these statutes refer to 6 these obligations as compulsory and binding. 7 So there's nothing new, merely because FISMA was 8 created, that caused a change of circumstance. In fact, the 9 standard that was described by Mr. Warshawsky of one that you 10 look at the danger to the Trust data and weigh it with all the 11 circumstances to make sure it's commiserate, that the security 12 is commensurate with the risk, that's a standard that was 13 derived from the Computer Act of 1987. It's not something that 14 was suddenly created by FISMA. 15 Your Honor, to take that one step further, Judge Brown 16 in her opinion in Cobell XVIII said this is not a FISMA case, 17 and in many respects she's right. It's a Trust case. And the 18 standards that were imposed on the defendants under Trust law 19 existed in 2001, existed prior to that time, and existed today. 20 Cobell XVIII reiterated that Congress intended to 21 impose on the defendants Trust obligations, traditional 22 fiduciary duties, unless they unequivocally expressed an intent 23 to the contrary. There's nothing in FISMA, in FISMA's enactment 24 that said, Look, no longer are these obligations imposed on the 25 Secretary of Interior. 0032 1 There's no such intent expressed in FISMA. They 2 have -- had in 2001 a fundamental duty to protect Trust data. 3 They have it today. Nothing has changed. 4 Your Honor, the other thing they argue in their 5 original motion, and I'll just address this briefly, not only 6 did they say the law had changed, but they said the facts have 7 changed. And the specific argument they made was the 8 deficiencies which led to the entry of the consent order are no 9 longer present in Interior's IT systems. We thought it was odd 10 that there's no affidavit that was presented to this Court, or 11 any evidence to support that statement in that brief. 12 And in fact, after we filed our three affidavits last 13 week, the response and the reply was, Well, that issue is no 14 longer relevant. So basically, the second prong of their attack 15 on this consent order seems to have gone away. 16 Your Honor, we do believe it is relevant, and 17 particularly for this reason: Your Honor, what those affidavits 18 show -- and it's the affidavit of Ms. Tyler, Ms. Infield, and 19 Mr. Rice, and they're two or three key security people there at 20 BIA. And what those affidavits show is that in the five and a 21 half years since that consent order was entered, nothing has 22 changed. They say that if it was connected to the Internet, it 23 would pose unmitigated risks on Trust data. They say there is 24 no intrusion detection on these systems. 25 That's important when you consider where IT security 0033 1 was back when this consent order was entered. We cited the 2 statement from Secretary Norton. I believe it's in footnote, I 3 believe six or seven of our brief. She said, "At the time the 4 consent order was entered," she told Congress, "we cannot 5 protect Indian Trust data with our computer systems. There is 6 no security." 7 Judge Lamberth, in the year prior to issuance of that 8 2001 order, said basically, Look, BIA has no security plan for 9 the protection of Trust data. The Special Master made similar 10 findings shortly before entry of the consent order. 11 So Your Honor, basically when this order was entered, 12 there was no security. And I suggest to you that the affidavits 13 we've presented show nothing has changed since that time. 14 That's particularly important when you consider what 15 the consent order said. Because the consent order said, "Court, 16 number one, we're going to hire a contractor, and we're going to 17 go and have that person go and insert or apply intrusion 18 detection systems into all our systems." That was the first 19 thing they said. 20 Then secondly, "We're going to have a contractor come 21 in, and they're going to review each system and each major 22 application, and we're going to make sure that those are in 23 compliance with OMB Circular A-130." 24 The interesting thing about Ms. Tyler's affidavit and 25 Mr. Rice's is, they haven't even started doing that. According 0034 1 to Ms. Tyler, they're just now beginning to order an intrusion 2 detection system. 3 Your Honor, I know this is not an evidentiary hearing, 4 at least not yet, on this issue. But if this were an 5 evidentiary hearing, there would be testimony that Mr. Cason, 6 who is the primary person behind this effort to reconnect the 7 systems, said just a few weeks ago, "What have you been doing in 8 five and a half years?" And I suggest we have the same 9 question: What have BIA and the offline bureaus been doing for 10 five and a half years? 11 This is important for two reasons, Your Honor. Number 12 one, you've got to wonder what responsible trustee would go and 13 reconnect these systems to the Internet, knowing there's 14 unmitigated danger to the Trust data on those systems, and to 15 ask Court for basically permission to do so. 16 And it raises a second issue, whether this Court in 17 fact has authority to do something when a trustee takes such 18 action, which is such a gross breach of their fiduciary duty. 19 Your Honor, I suggest to the Court that it does. If I 20 could use an analogy, in a few months we're hopefully going to 21 have -- 22 THE COURT: I don't read the Court of Appeals as saying 23 that a failure of Internet security can be a gross breach of 24 fiduciary duty, counsel. That's not the way I read it. 25 MR. SMITH: Your Honor, I suggest that -- 0035 1 THE COURT: What I read them as saying is, "Okay, it 2 was all right the first time around, but you've got a little too 3 hands-on about this IT stuff." 4 MR. SMITH: I think you're exactly right. The Court of 5 Appeals did say that the Secretary has an obligation to protect 6 Trust data, and in Cobell XII, and they reiterated in 7 Cobell XVIII, that the Court has authority to -- 8 THE COURT: Tell me this, Mr. Smith. Is there anything 9 in this record that -- I mean, IT risk is a fact of life. We 10 all know that. 11 MR. SMITH: Sure is. 12 THE COURT: Is there anything in this record that shows 13 any large-scale loss, or any attacks on this data, or any 14 hacking in, or any -- is this anything more than risk? 15 MR. SMITH: Your Honor, I think it is more than risk. 16 In the IT security trial, we provided several examples of where 17 there actually had been attacks on the system, and there had 18 been some manipulation of data. In fact, even the Special 19 Master was able to go in and manipulate data. 20 THE COURT: Able to, yes. But I mean, is there any 21 showing that there are bad guys out there messing around with 22 the data? 23 MR. SMITH: Yes, Your Honor. 24 THE COURT: Who are they and what did they do? 25 MR. SMITH: There was testimony in the trial that there 0036 1 are millions of attacks on the Department of Interior's systems. 2 What do they do? There's hackers all over the country, all over 3 the world. And it's easy to hack in, unfortunately, the 4 Interior's systems and, for example, change an account holder to 5 themselves so they receive the royalty payments that should be 6 going to an Indian beneficiary. 7 THE COURT: Has that happened? 8 MR. SMITH: Your Honor, we believe it has happened. 9 THE COURT: What do you mean, you believe it's 10 happened? Do you have any proof that it happened? 11 MR. SMITH: Your Honor, the answer to that is, we have 12 Indian beneficiaries who don't receive their payments. We have 13 evidence of -- 14 THE COURT: So maybe somebody hacked in and changed the 15 payee, maybe? 16 MR. SMITH: Your Honor, we know that there are millions 17 of attacks on that system, and that Interior does not have the 18 capability to stop it. 19 Your Honor, I suggest to the Court that perhaps in 20 the -- 21 THE COURT: What I'm trying to figure out, Mr. Smith, 22 to be honest with you, I'm trying to figure out what's in this 23 for the plaintiffs. Is this anything more than just sort of a 24 victory, a notch on your gun, we beat them on this subject? 25 What is there really in it for the plaintiffs here? 0037 1 MR. SMITH: No. Let me take an example here. Here 2 we're dealing with BIA, and I think the record evidence at this 3 point shows there's no security at BIA. They go ahead and put 4 it on-line and connect it to the Internet; the reliability of 5 that Trust data is gone, Your Honor. It's important, as the 6 Court of Appeals noted, for there to be an accounting, that you 7 have integrity of those systems. But you need to have reliable 8 Trust data, and if you have open systems subject to 9 manipulation, you don't have that. 10 THE COURT: Well, at the end of the day, the government 11 is going to have to demonstrate -- and we're sneaking up on the 12 subject of this October trial. The government is going to have 13 to demonstrate that its accounting is a real accounting. 14 MR. SMITH: There's no question about that. 15 THE COURT: You will take the position, "Well, there's 16 no computer security here. How do we know?" Right? 17 MR. SMITH: We're going to contend that the data is 18 unreliable and the systems are unreliable. That's exactly 19 right. 20 THE COURT: The fewer controls there are on the system, 21 the better you like it, from that point of view, because the 22 more able you are to show that the data is unreliable. Why 23 don't you just give them enough rope to hang themselves, if 24 that's what your theory is? 25 MR. SMITH: That's a good point, Your Honor. It's a 0038 1 two-edged sword. Certainly for purposes of this accounting 2 trial, we can show that the systems are unreliable, there is no 3 security. 4 But Your Honor, this case doesn't end here. There's 5 another aspect to this case. As the Court in Cobell XIII noted, 6 there's an issue of Trust reform. The Trust does not end here, 7 and we have an obligation to our Trust beneficiaries, our 8 clients, to make sure their data is protected. It doesn't end 9 here. And, going forward, their data can't be on systems that 10 are open to manipulation as the BIA systems are. 11 THE COURT: Okay. Do you want to be heard further, 12 Mr. Warshawsky? 13 MR. WARSHAWSKY: Briefly, Your Honor. 14 Your Honor, you asked, Is there any record of any loss, 15 any proof that anyone has ever hacked into a system and 16 manipulated data? The Cobell XVIII Court squarely addressed 17 that. Mr. Smith talked about no facts since 2001. The 2005 18 hearing, as I cited, 394 F.Supp 2d 170, was to address the 19 current state of IT security in 2005. And the Cobell XVIII 20 Court, reviewing that -- 21 THE COURT: Mr. Warshawsky, excuse me. Mr. Gingold, 22 when he finishes consulting, I'll be able to listen to you. 23 MR. GINGOLD: I'm sorry, Your Honor. 24 THE COURT: Go ahead. 25 MR. WARSHAWSKY: 455 F.3d at 315, the Court of Appeals 0039 1 noted that "The class members had pointed to no evidence showing 2 that anyone had already altered IITD by taking advantage of 3 Interior security flaws, nor that such actions are imminent. 4 There was no reason to believe that the effects would be so 5 extensive as to prevent the class members from receiving the 6 accounting to which they're entitled." So in fact, there's been 7 a lot of evidence in the record since 2001 about the state of IT 8 security. 9 Mr. Smith commented, he made the statement, There's no 10 security at BIA. I'll be brief. We addressed this in our reply 11 brief. Gross misstatement of the state -- of what was reported 12 in the quarterly report, the 28th quarterly report. It was not 13 a statement that there's no security at BIA. The 28th quarterly 14 report referred to the certification and accreditation process 15 for one system, which, by the 29th quarterly report, which we 16 filed a week before their opposition, the 29th quarterly report 17 advised the Court that the C&A process had been completed for 18 that system and it did have an authorization to operate. 19 So it's simply not true that there's no security at 20 BIA. There's certainly adequate security to operate the systems 21 in their current environment. Is there adequate security to 22 connect it to the Internet right now? Interior has not made 23 that determination. 24 But until the consent order -- as long as the consent 25 order process is in place, that's not a decision that Interior 0040 1 can make. And as a result, people, the public, including 2 beneficiaries, are not able to get the benefit of an agency 3 connected to the Internet. 4 THE COURT: I think we have kind of a chicken/egg 5 situation here. I don't quite understand the argument that you 6 can't even prepare to connect something while the consent order 7 is in place. I think there's a good deal of merit to the 8 government's position that the consent order is no longer 9 justified, and certainly doesn't work the way it was intended to 10 work. 11 But I don't see why Interior can't go ahead with its 12 plans to connect these bureaus, and when you're ready, come to 13 me and say, "I want to connect the bureau." And I'm probably 14 going to say yes, because I'm going to look at Cobell XVIII and 15 say, "I don't really have the -- the Court of Appeals doesn't 16 want me to tinker around with this." 17 But you haven't shown me -- you haven't made the 18 requisite showing that you have any security. You haven't filed 19 the IT reports, you haven't -- you say, "Oh, yeah, we have 20 security," but you tell me that you're not even ready to connect 21 the bureaus to the Internet. All this consent decree really 22 does is to stop you at the last step of connecting to the IT. 23 There's nothing in this consent decree, is there, that says that 24 you can't prepare to connect. 25 MR. WARSHAWSKY: And I apologize if I haven't been 0041 1 clear about it, Your Honor. Clearly, the Interior Department 2 would like its remaining bureaus and offices to be connected. 3 Clearly, they are taking steps internally to bring that about. 4 They've done an incredible amount. And I can tell you that 5 because, Your Honor, I've been working on this case since 6 January 2002. 7 THE COURT: Well, if we were working on a clean slate, 8 you could just go ahead and do it. But we're not. We have a 9 consent decree. So I'm going to deny the motion to vacate, but 10 without prejudice. And when you're ready to connect to the 11 Internet, either all at once or bureau by bureau, come back and 12 renew the motion, and I would say the chances are it's going to 13 be granted. But I don't have the right showing before me to 14 grant that motion at this time. 15 MR. WARSHAWSKY: Your Honor, may I have just one 16 moment? 17 THE COURT: Yes, sir. 18 MR. WARSHAWSKY: Your Honor, thank you very much. 19 THE COURT: Thank you. Now let's talk about what's 20 going to happen in October and what we're going to do between 21 now and then. 22 My reaction to what both sides have told me is that 23 you're all wrong. Interior seems to be saying that -- if I read 24 your bench memo correctly, you seem to be saying that what I'm 25 going to do is make kind of an APA review of your historical 0042 1 accounting plan, and that that would be enough to determine 2 whether the language you keep quoting from, one of the Cobell's, 3 ultimate provision of historical accounting under Interior's 4 plan, will be arbitrary and capricious. 5 Interior points out, I think correctly, that I'm 6 bounded on both sides. I'm bounded by a whole line of cases and 7 the rulings of the Court of Appeals by my, I'm quoting from your 8 brief now, "inability to order broad programmatic reforms." I'm 9 bounded on the other side by rulings that make me unable to 10 require the agency to file a detailed plan of action. 11 Interior concedes that whatever it does has to satisfy 12 fiduciary standards, but says I cannot abandon the APA process, 13 underscoring the word "process." 14 And so the question, they say, is whether the 15 department is taking steps so defective that they would 16 necessarily delay rather than accelerate the ultimate provision 17 of an adequate accounting. Well, if we were just talking about 18 delay and acceleration, that might be right. 19 But we're talking about more than delay and 20 acceleration; we're talking about what an accounting is. And I 21 think the parties have rather dramatically different ideas about 22 what an accounting is. 23 What I have in mind is something that would take into 24 account -- that would display some subset of the total 25 accounting job. It's a subset because you're not finished, and 0043 1 you won't be finished by October. That's understood. But 2 enough of a subset that can be picked at, probed at, looked at, 3 studied, cross-examined, challenged to determine whether indeed 4 the Department of the Interior is on the way to the ultimate 5 provision of an adequate accounting. 6 I have the feeling that the plaintiffs look at what 7 you're doing and say, "This isn't an accounting, this is 8 bookkeeping of the last five or 10 years of a few accounts. But 9 it's not the accounting that is required." 10 And frankly, you-all have been struggling with each 11 other for so long on IT systems and sanctions and contempt and 12 fee petitions, and all that other flak that's been circulating 13 here, that there has never, to my knowledge, been a real 14 engagement on the subject of what is an accounting, what is an 15 adequate accounting? And I'm not -- I'm interested in more than 16 just your plan, I'm interested in what you've actually done. 17 Now, what I want to know from counsel is, can you get 18 your minds around something like that, and help shape a hearing 19 that is that? It's not going to be -- believe me, it's much too 20 late in the game for an APA paper review of everything. 21 Much too much water has flowed under the dam or over the 22 bridge -- under the bridge or over the dam for us to make this a 23 straight up, old-fashioned APA document review of a record. It 24 can't be done that way. There's going to have to be testimony, 25 probably by experts. 0044 1 The plaintiffs want a lot more discovery than they're 2 going to get. You've had a lot of discovery. I'm not sure that 3 I even see discovery between now and October. But what I would 4 like to have is some discussion from both sides, if you can fit 5 your discussion within the framework that I've just tried to lay 6 out here. 7 MR. KIRSCHMAN: Thank you, Your Honor. 8 Your Honor, when you ask what is the accounting, I 9 think one of the things you address are a lot of the issues that 10 Interior has already contemplated, first in establishing the 11 2003 accounting plan, and now considering the adaptations to 12 that plan and preparing what will be the 2007 accounting plan. 13 In our bench memorandum, we address certain 14 determinations that we propose should be reviewed under the 15 standards you cited. And of course, that is a step so defective 16 that they would necessarily delay the accounting. We took that 17 from Cobell VI. And those parameters of the accounting go to, I 18 think your general question, what is the accounting? So those 19 issues could be addressed. 20 We alluded to some of those in the footnote, and if you 21 look at plaintiffs' response, you'll see that they object to 22 them. Some of those related to, for example, whether direct pay 23 accounts are being considered. 24 THE COURT: Let's talk about that. The defendants say, 25 you've excluded the vast majority of payees. Is -- who are 0045 1 these people? Let's see. "It will not perform a historical 2 accounting for so-called direct pay transactions." 3 What is a direct pay transaction? Excuse the 4 ignorance. 5 MR. KIRSCHMAN: A transaction where -- you have a lease 6 for grazing; the money, the payment for that lease can go 7 directly from the company leasing the land to the Native 8 American. It does not pass through the Trust system. 9 THE COURT: Oh, okay. 10 MR. KIRSCHMAN: It is our position -- 11 THE COURT: How could you account for something that 12 doesn't pass through the Trust system? 13 MR. KIRSCHMAN: Well, as a matter of law, we don't 14 believe it's covered, and Interior is not in a position to 15 account for something that hasn't entered the Trust. So that is 16 one broad issue. 17 But we feel there are several of these determinations 18 that are not final agency action. We believe the final agency 19 action here will be the final accounting, final historical 20 accounting that is provided. But that will ultimately lead to 21 that accounting, and that can be reviewed by this Court as a 22 step that should be addressed, so that the Court determines, is 23 it so defective that at the end of the day, when the accounting 24 is done, it will not be arbitrary, capricious, or contrary to 25 law. 0046 1 So there are several scope issues like that, that have 2 already been briefed to the Court of Appeals but that were not 3 ruled on. And as we point out in our bench memorandum, the 4 Court of Appeals said in remanding the case back that to the 5 extent those issues are addressed by this Court, a substantial 6 deference should be given to the Secretary in interpreting the 7 1994 Reform Act. 8 Now, if it's a legal issue, there are legal arguments 9 that can be made, and you do not need witness testimony on, 10 again, for example, the direct pay accounts. These are 11 something we believe -- defendants believe can be addressed 12 prior to any hearing, and that will, as we address these, 13 truncate the October 10th hearing to the nub. 14 THE COURT: I don't have any problem with that. 15 MR. KIRSCHMAN: Well, that would go a long way, I 16 think, to addressing the broad issue: What is a historical 17 accounting? 18 You also asked the question, "I want to know what 19 you're doing." And we believe that the administrative record -- 20 first of all, the 2007 accounting plan that will demonstrate the 21 adaptations to the earlier plan will demonstrate the changes. 22 THE COURT: When is this 2007 accounting plan coming 23 out? I think it was promised in March or April, wasn't it? 24 MR. KIRSCHMAN: When last we spoke, Your Honor, I did 25 mention that Interior did intend it for publication at the 0047 1 beginning of April. That obviously has not come to pass. 2 Interior is working on finalizing the plan, and the explanations 3 for it. 4 So I would say -- I'm not going to give a date, but I 5 would say in the coming weeks. They are working on a draft that 6 is far along, but there are still points to consider with our 7 experts, and they're doing that. So it will certainly be in 8 time to resolve the issues and meet the deadline of an 9 October 10th hearing. I think we can say that. 10 But that document and the administrative record that 11 will support it, the supporting documentation upon which the 12 2007 accounting plan is based upon, will answer the question: 13 What has Interior been doing? Because it will serve as a 14 justification for their upcoming plan, and that plan will 15 include a schedule for the accounting, for the historical 16 accounting. 17 I made a statement back in December 2006, at our first 18 status conference, that I could not give you a date when the 19 accounting would be completed, and that has oft been used to 20 state that the accounting is nowhere in sight. And I guess it 21 depends on your vision. 22 But there will be a schedule proposed by the Department 23 of Interior so that the Court will understand what is planned 24 when it comes to the amount of work to be done, when that work 25 is proposed to be done, and what the final accounting will 0048 1 consist of. 2 And as part of that record, again, we have the 3 historical statements of account. And Your Honor, you have many 4 of those pending before you. What you do not have are any 5 historical statements of account for land-based accounts. But 6 those are in work, and as we've told the Court, significant work 7 has been done to prepare those, especially regarding the 8 electronic era, 1985 to 2000. 9 That will be presented to the Court, and that will be 10 in a paper record. There will be a lot of information there 11 from the Department of the Interior and its experts, its 12 accounting experts and its statistical experts, that demonstrate 13 what they have been doing. 14 The notion that nothing has been done is entirely 15 inappropriate and incorrect. A lot of work has been done. This 16 has taken time, and it has cost money, more money than has 17 appropriated over the years by Congress. 18 So all this goes into your review. We are not shying 19 away from a review, but I respectfully say that there is a role 20 for the APA to play here, and that's to frame the issues. 21 Because you have to look why we're here in the first place. 22 One of the things that formulates that review is the 23 complaint. And the core claim here is an APA claim regarding 24 agency action unreasonably delayed. And that has not changed. 25 And the Court of Appeals has continued to reiterate 0049 1 throughout the years, from Cobell VI, which we quote, related to 2 this Court's ability to review steps taken as so defective, to 3 its last decisions in July 2006, where it again stated in 4 essence, we have an APA claim that here is affected by Trust 5 law. But Trust law, the Court of Appeals has said, does not 6 supplant the APA. It only adds context to the fiduciary 7 responsibilities. 8 And the reason we underline "process" is because the 9 APA, the Court of Appeals has said, controls jurisdictional 10 issues. And the scope of review that would take place is a 11 jurisdiction issue. What standards, what length of review, what 12 type of review will occur, we believe are jurisdictional issues. 13 So the APA does have a role here, despite Trust law, and the 14 Court of Appeals has made that clear. 15 So are we saying the Court should take no testimony? 16 If the record is not clear and there are gaps, or testimony is 17 needed to clarify what you have before you because you say, "I 18 look at this and I don't get where you're going. I see all 19 these documents and I see your 2007 accounting plan, and I still 20 see a gap in the record that I need to hear testimony on." 21 Or, more correctly, if plaintiffs point out a gap in 22 the record, then there may be a need for testimony as a last 23 resort. 24 But as far as any general discovery, there's no purpose 25 for that to get to the matter at hand. What discovery this 0050 1 summer would do is effectively take all the resources the 2 Department of the Interior has to work on the accounting, and 3 devote it to this litigation, again, as people prepare for 4 depositions and go scurrying for documents. The documents that 5 matter will be presented to the plaintiffs and the Court. 6 So there is no basis for discovery, and in their 7 response to our bench memorandum, the plaintiffs have not 8 offered any. They offered a schedule, but no justification for 9 it. And under the APA, which again should govern this process, 10 that discovery should only come after the record has been 11 reviewed and the documentation has been considered, and specific 12 concerns have been expressed by the plaintiffs. 13 Again, this should not be a new record. We should not 14 come into this Court on October 10th with the intent to 15 establish a new record based on testimony. What we should be 16 doing other than October 10th, respectfully, Your Honor, is 17 supplementing the paper record that has been offered. 18 And that would include historical statements of 19 account. That would include, for example, the Department of 20 Interior's accounting standards manual. The Department of 21 Interior uses the accounting standards manual, compiled based on 22 its accounting experts, to decide what documents are being 23 reviewed to do the accounting. So again it goes to, what's the 24 accounting? 25 And I should point out, there was a Phase 1.5 trial 0051 1 that Judge Lamberth held that explores a lot of these issues: 2 What are you doing, what's the accounting? And when he was 3 presented with the historic -- I'm sorry, with the accounting 4 standards manual, he approved its use. He approved Interior's 5 use of the 2003 version of that historical -- I did it again. 6 The 2003 version of that accounting standards manual. 7 So there will be explanation for the Court as to what 8 Interior has been doing over the last years. And it will be, if 9 not the complete record, an awful big starting point for the 10 Court to understand what Interior is doing and what it plans to 11 do based on what it's learned, and the appropriations schedule 12 that it's anticipating. 13 THE COURT: When does Interior expect to complete the 14 first land-based account accounting? 15 MR. KIRSCHMAN: I'm going to be so general as just to 16 say this calendar year. I think their schedule may be more 17 precise, but they are -- these again relates to the electronic 18 records era. But in the coming months. 19 THE COURT: You're telling me that there won't be any 20 land-based accounts ready for scrutiny and review in October? 21 MR. KIRSCHMAN: I am certainly not telling you that. I 22 think there will be. I think there will be thousands of 23 historical -- statements of account related to -- 24 THE COURT: They're only going to go back to '85 25 because they're going to be electronic? 0052 1 MR. KIRSCHMAN: The ones that will be done this 2 calendar year will relate to land-based accounts within the 3 electronic era. That's my understanding. 4 Now, to be clear, some of those accounts have paper 5 tails, paper trails that go back into the paper era, that 6 precede 1985. But what Interior is doing is looking at those 7 land-based accounts that are most readily available for review, 8 and a good percentage of the funds and a good number of 9 land-based accounts that are being considered fall within that 10 electronic records era, Your Honor. 11 So in October, I do not anticipate that you will have 12 before you historical statements of account for land-based 13 accounts that are solely in the paper era. I think that's a 14 fair representation, and before we leave, I'll make sure I'm not 15 saying anything off. But you will have, I believe, historical 16 statements of account for land-based accounts to review, and 17 that will demonstrate the work Interior has done and plans to 18 do. 19 We mentioned in our bench memo, and we think it will be 20 important here, too, just so that we devote resources as 21 appropriate and the parties focus on the real issues that are 22 facing the Court related to the historical accounting, that the 23 October 10th hearing not address issues that were raised, for 24 example, in Cobell V. You mentioned Cobell V in your order. 25 One of those relates to the Department of Treasury's fiduciary 0053 1 responsibilities. 2 The Court has received summaries and information on a 3 quarterly basis from Treasury regarding its document retention 4 efforts. There's really no issue now that has surfaced related 5 to Treasury. So clarifying that Treasury's fiduciary duties, as 6 it were, are not part of the October 10th hearing will clarify 7 and help us narrow our resources and our work. 8 On the same token, we've discussed briefly fixing the 9 system, and plaintiffs' counsel mentioned it today. The Court 10 of Appeals mentioned that, after first reviewing 11 Judge Lamberth's structural injunction plan, and found that 12 other than to file a "to be" plan, Interior was not obligated to 13 produce more, related towards the fixing the system part of the 14 case. The "to be" plan was filed, and was filed quite a while 15 ago along with the fiduciary trust model. It was filed with 16 this Court. That's Docket Number 2882. 17 And there's no point now -- and plaintiffs certainly 18 have not raised any issues or objections or argument about Trust 19 reform that would merit consideration on October 10th. But we 20 think further defining the scope would assist the parties. 21 There is certainly enough to address, regarding the 22 historical statements of account, that can be done through legal 23 filings, it can be done through presentation of the 24 administrative record consistent with the Court of Appeals 25 discussion of this case over the years. And it gives context 0054 1 and a framework. 2 Plaintiffs have raised the issue of impossibility with 3 this Court. There is no real framework for that. It's not 4 contemplated in their complaint. But if you take their 5 allegations and review it in the context of an APA review, what 6 are their specific challenges to the work of Interior, and 7 whether those challenges demonstrate work that's so defective 8 that it's unreasonably delaying or would lead to arbitrary or 9 capricious conduct at the end of the day, then you have your 10 standard and you have a framework that makes sense of all of 11 this, and will allow the Court to review things in an organized 12 and lawful manner come October 10th. 13 THE COURT: All right. Mr. Gingold? 14 MR. GINGOLD: Mr. Harper will do this. 15 THE COURT: Mr. Harper? 16 MR. HARPER: Good afternoon, Your Honor. If I may, 17 with the Court's indulgence, speak to the issues of jurisdiction 18 and scope of the accounting and things of that nature, and then 19 turn to my colleague, Mr. Dorris, to speak on the discovery 20 issues? Thank you. 21 First, let me address the scope of the accounting, 22 because it's clear that the government and the plaintiffs have a 23 very different view. 24 We touched upon one issue, and that's direct pay. What 25 the government fails to mention in their brief or to you today 0055 1 is that the Court, the District Court, concluded after a long 2 evidentiary hearing, and after reviewing an Interior Department 3 Solicitor's memorandum opinion, the Westlaw cite for that is 4 1965 Westlaw 12755, in which the Solicitor himself concludes, 5 "It is settled beyond debate, of course, that the direct income 6 from a Trust allotment partakes of the character of the corpus 7 of the allotment itself, and is subject to all the authorities 8 and responsibilities of the Trust undertaking relating to the 9 allotment itself." 10 And so the Court concludes with that, and a number of 11 other items of evidence, quote, "Therefore concluded that 12 Interior's fiduciary duty to account, which predates the 1994 13 act, mandates that the adequate historical accounting of the IIM 14 Trust must include the accounting of all funds paid to IM 15 beneficiaries in conjunction with direct pay leases and 16 contracts." 17 Your Honor, you asked a good question: How does one do 18 that as a trustee if somebody is getting a direct pay? Well, 19 the way a normal trustee would do it, one who carries out their 20 fiduciary duties, is that they would seek a voucher from the 21 person making the payment that is sent in to them, so that they 22 can provide the necessary accounting later on to their 23 beneficiary. 24 That was not done here, as far as we can tell. Maybe 25 the government can say it was. But that's the purpose of the 0056 1 accounting process, is to determine whether or not they 2 fulfilled their fiduciary duty in this and other respects. 3 They've excluded many account holders. In the plan 4 itself, they intend not to give any accounting whatsoever. Even 5 though this is a class of present and all former beneficiaries, 6 they are not intending to give an accounting to anybody whose 7 accounts closed prior to October 25th, 1994. 8 Now, let me just touch upon, if I could, Your Honor, 9 the absurdity of that. Because I think it illustrates the 10 fundamental problem with the government's entire approach. In 11 Cobell VI -- in Cobell VI, this is what the Court of Appeals 12 held. And I'm just going to quote the language because I can't 13 say it better than they have. "The enactment of the Indian 14 Trust Reform Management Act did not alter the nature and scope 15 of the fiduciary duties owed by the government to IM 16 beneficiaries. 17 "With respect to the accounting itself," this is 18 critical, "reaffirmed the government's preexisting fiduciary 19 duty to perform a complete historical accounting," and then goes 20 on to say this: "Nothing in the 1994 act, nor any other federal 21 statute, acts to limit or alter the right to a complete 22 accounting." 23 So if I'm an IM beneficiary and my account was closed 24 in 1990, this says the duty preexisted the '94 act. Then I had 25 a right to get an accounting for my trustee at that time. And 0057 1 if the '94 act, by the Court of Appeals' own words, does not 2 alter or limit that right, then it must be that I still have a 3 right to that accounting after the '94 act. 4 Yet they're excluding each and every beneficiary that 5 falls into that category, hundreds of thousands of people. So 6 even if you just take their words for what they're saying 7 they're doing, they're excluding the vast majority of 8 beneficiaries, and they're not going to give them an accounting, 9 not in one year, not in 10 years, not in 100 years. They're 10 just never going to do it, according to the government. 11 In part, we believe that the reason they're not going 12 to do it is because they can't. They can't do it because 13 they've destroyed the documents and because the data that they 14 do have is unreliable. And we believe that we can show that, 15 and would ask that we have some discovery to further elucidate 16 those issues. 17 But there's many of these exclusions. If you look at 18 their plan, there's exclusion after exclusion. Deceased account 19 holders are excluded -- 20 THE COURT: Explain that one to me, deceased account 21 holders are excluded. 22 MR. HARPER: Anybody who is passed away prior to the 23 lawsuit, as I understand it, is being excluded from the 24 accounting. They don't give accountings to any of those 25 individuals. 0058 1 So if, say, somebody -- in fact, I don't think it's 2 even limited to that. It's anybody who died prior to the year 3 2000, because their accounting only goes up to 2000. If they 4 died, they don't get an accounting, even though, of course, 5 their heirs would benefit from that accounting. And they have 6 the right to assert that accounting right. 7 Again, on that particular issue, this Court has already 8 decided the question, and held that they do have to account for 9 those beneficiaries. 10 So again, time and again, they're continuing to exclude 11 individuals, deceased account holders, pre-October 25th, 1994 12 beneficiaries, and a whole slew of others, direct pay, those who 13 pursuant to compact or contract or other means, their assets are 14 managed by a tribe, they excluded them. 15 What's critical with that is, under 25 USC, it is very 16 clear that a Trust beneficiary whose assets are managed by a 17 tribe pursuant to compact or contract do not lose any of their 18 rights. Its very clear on the face of the statute. It says, 19 "It does not diminish or modify the Trust responsibilities owed 20 to individual Indians." Yet the government excludes them from 21 the accounting, as well. 22 So time and again we have this preexisting duty to 23 account. The nature and scope of it is not defined by the 1994 24 act. That is the principal and most critical holding of 25 Cobell VI. Yet that's all they want to look at, is the 1994 0059 1 act. And they say, "If somehow we do some actions just with 2 post-1994 act dollars, post-1994 act accounts, that's good 3 enough." Well, it's clearly not. There have been decisions 4 rendered by this Court that make it so. 5 We would look to have these issues further briefed and 6 rights declared as to what is our right to an accounting? Which 7 beneficiary has a right to an accounting? We believe it's 8 already been decided, that it's an all-funds accounting for each 9 and every beneficiary, whether a former beneficiary or a present 10 beneficiary. We think that that is the clear law of this case, 11 and we can offer up a briefing at any point in time that 12 demonstrates this in conclusive terms. 13 With respect to the APA issues -- and again, I'll let 14 my colleague Mr. Dorris talk on the specifics of the discovery. 15 The fact is, Your Honor, that this is a Trust case. The 16 government points to our complaint. Our complaint was not 17 limited to the APA. And as this Court is well aware, a 18 complaint need only identify the facts by which you can later 19 conclude the causes of action. 20 So even if it didn't, even presuming it didn't, notice 21 pleading requirements only require that we put forward the facts 22 necessary to get the relief we seek. And the relief we seek 23 here is an accounting and other equitable remedies appropriate 24 for a Trust beneficiary to enforce the Trust. 25 And this Court sits as a Court in equity, having the 0060 1 same equitable powers as the chancery courts of England in the 2 adoption of the 1789 Judicial Act. Those powers are broad, 3 particularly in the Trust context. 4 And what we're seeking here is precisely those remedies 5 available to every other non-Indian Trust beneficiary in this 6 country. And the fact that we're dealing with 500,000 7 individual Indians should not matter as far as what are the 8 rights of the beneficiaries involved. And they have a right to 9 an accounting, and they have a right to other equitable 10 remedies. 11 In particular, if the government cannot perform the 12 requisite accounting, and we think they either cannot or will 13 not -- they say they will not. I mean, we are now eight years 14 after the Court of Appeals declared, in a record eight years 15 ago -- 16 THE COURT: I got that part. 17 MR. HARPER: -- unconscionable delay, Your Honor. 18 Unconscionable then. If it's unconscionable then, Your Honor, 19 what is it now? At what point in the government's estimation 20 can this Court act? 21 We say the time to act is now, and the scope of the 22 proceeding be with -- we believe is appropriate, is to have that 23 Phase II trial, to have the government come up with all the 24 proofs they can with respect to these beneficiaries, and 25 establish whatever balances they think they can establish. And 0061 1 then we can make the necessary objection to that accounting. 2 And we believe that that will demonstrate that this is 3 not a complete accounting, this is not an adequate accounting, 4 it does not discharge their duties. 5 THE COURT: All right. The plaintiffs are going to 6 have to get used to much more modest goals for this October 7 trial, and the defense is going to have to get used to much more 8 ambitious goals for this October trial than either side has 9 thought about. 10 I would be interested in the prehearing briefing that 11 you're talking about, Mr. Harper, that would identify and sort 12 out for me the classes of beneficiaries that you say the 13 government is impermissibly not going to render an accounting 14 for. I've got to sort that out before we go any further. 15 Now, it may be that this will all be generated by this 16 elusive 2007 plan that we were going to have in April. I don't 17 know when we are going to have it. I can't wait until September 18 for it, because seems to me that that plan itself will be 19 subject to some challenge, and I would hope that is all done 20 before we start hearing testimony in October. What are the 21 chances of that? 22 MR. KIRSCHMAN: Oh, yes, Your Honor. Again, I think it 23 should be completed in the coming weeks. 24 THE COURT: "The coming weeks"? 25 MR. KIRSCHMAN: Well, we're in the middle of May. At 0062 1 the end of May, June. 2 THE COURT: Well, I would hesitate to order you to 3 finish it by a certain time, because that might be construed as 4 meddling. 5 MR. HARPER: Your Honor -- 6 THE COURT: Come on, guys. This has been a long time 7 in the coming. What's the holdup? 8 MR. KIRSCHMAN: Again, there's just a lot of issues to 9 consider and final determinations to be made on what action will 10 be taken. I think we're just talking a matter of weeks. 11 THE COURT: Mr. Harper, do you want to start briefing 12 before that plan comes out? 13 MR. HARPER: I think there are significant issues based 14 on the government's admissions -- 15 THE COURT: Everyone behind you is nodding their heads. 16 MR. HARPER: Yes. I think the answer is yes, Your 17 Honor. 18 Could I speak on the meddling issue? Because this has 19 already been decided by the Court of Appeals in Cobell VIII. In 20 Cobell VIII, Judge Lamberth had ordered the government to 21 provide an accounting plan by January 6th, 2003. The Court of 22 Appeals vacated other aspects of the order, but said they 23 clearly could require them to provide their plan by a date 24 certain. And we think that that is law of the case, here. In 25 fact, the mandate rule applies. And so Your Honor clearly has 0063 1 the authority to order the government to produce that plan by a 2 date certain. 3 THE COURT: Well, I don't doubt that. I just -- it 4 doesn't make any sense to me to start issuing rules that don't 5 have any -- you know, that don't have any substance. 6 MR. KIRSCHMAN: Your Honor, I obviously hesitate to 7 give dates certain, but I would anticipate after conferring with 8 counsel that by May 31st, plaintiffs and the Court would have 9 the historical -- I'm sorry, the 2007 accounting plan. 10 THE COURT: Would it help you to get that done if I 11 made it an order? 12 MR. KIRSCHMAN: No, sir. We understand how significant 13 the accounting plan is, and how important it is to your review. 14 And you've obviously reiterated that again today. 15 THE COURT: All right. It's very important to get that 16 out. But frankly, I don't want any more contempt citations, I 17 don't want any more sanctions motions. I just don't want any 18 more of that in this case, counsel, period. 19 So if I issue an order for him to do it on May 31st and 20 it doesn't come in on May 31st, the next thing I'd get from you 21 would be a motion for contempt. I don't want that. I'm not 22 going to order them to -- I'm not going to order them to issue 23 the report by May 31st. I'm going to issue a strong, 24 jaw-boning, interest of the Court in getting that thing done an 25 issue. Okay? 0064 1 MR. KIRSCHMAN: Yes, Your Honor. 2 THE COURT: All right. Mr. Harper? 3 MR. HARPER: Well, we believe that briefing on that 4 question, as well as the nature and scope of the government's 5 duties with respect to the Trust, would both be helpful for the 6 Court, and we would propose to do briefing on both of those 7 items. 8 The reason that's so critical is, as the Court of 9 Appeals in Cobell VI held, one aspect of the accounting is not 10 only to sort of define all the withdrawals, accruals, things of 11 that nature, but to provide sufficient information so the 12 beneficiary can readily ascertain whether or not the Trust 13 duties have been faithfully carried out. 14 And the only way to do that is to have a declaration of 15 the Trust duties that are applicable. Because I think again, 16 we're far apart. The parties are far apart on that. And the 17 Court defining those Trust duties that are applicable, which in 18 Cobell XIII, this Court -- excuse me, the Court of Appeals held 19 was perfectly appropriate and within the discretion of this 20 Court, we think would offer key guidance as to how the 21 accounting duty and other duties should go forward. 22 THE COURT: Just as a thought experiment, Mr. Harper, 23 tell me -- let's assume that you're right about these direct 24 payments, that some unknown number of lessees made direct 25 payments, to landowners, of royalties or lease payments, that 0065 1 Interior had no records of them, demanded no vouchers, didn't 2 track it. So neither you nor Interior knows who received the 3 direct payments, or from whom, or how much they were, or over 4 what period of time. Right? That's the hypothetical that I'm 5 trying to get my mind around. 6 Now, your position would be, "Well, with respect to 7 those people and those payments, that's a violation of the 8 fiduciary obligation of the trustee." Right? 9 MR. HARPER: Correct, Your Honor. 10 THE COURT: What's the remedy, and for whom? 11 MR. HARPER: First of all, we would seek that -- 12 documents from third parties, and that is particularly 13 appropriate in instances, for example, with oil and gas, where 14 you have a lot of third party records, to make those proofs. 15 The second thing that I would say is that we would -- 16 that doesn't mean that Interior does not have material and 17 documentation. And I don't want to get into the discovery 18 questions. But they have, for example, leases, and those leases 19 require that certain payments are made. And if those payments 20 were made, according to them, by direct pay, then we would want 21 those leases, and we would -- in order to demonstrate that they 22 failed to live up to their duties. 23 Now, we've always said that there are alternative 24 equitable remedies that may be available when the Court and if 25 the Court were to find that they breached their duty and cannot 0066 1 discharge their accounting duty. And that would be an instance 2 in which they can't possibly discharge their accounting duty. 3 And that's when this Court, sitting as a chancellor in 4 equity, would exercise the authority vested in him to protect 5 the interests of the beneficiary. 6 And there are a whole slew of equitable remedies 7 available. 8 THE COURT: And require what? A requirement to make 9 payments, and maybe double payments? 10 MR. HARPER: Your Honor, there is an issue with that. 11 And the law of Trust is clear on this point, that where there is 12 an absence of information, all doubts are against the trustee 13 and for the beneficiary. Because it means that the trustee 14 failed to -- in breach of their fiduciary duty, to maintain 15 sufficient records to discharge their accounting duty. 16 So if they've done that, all inferences are against 17 them, all evidentiary inferences are against them and for the 18 beneficiary. If it's a choice between -- where you don't have 19 evidence, then the Court is set with two choices. Either it 20 says the payment -- we're going to presume the payment was made, 21 or we're going to presume the payment was not made. And in that 22 circumstance, Trust law is very clear and says you presume the 23 payment was not made. 24 THE COURT: Yeah, but you've been talking all along 25 about -- you say, "Oh, no, we're not after damages. Damages 0067 1 wouldn't be proper in your court. We don't call it damages, we 2 call it equitable disgorgement." Right? 3 MR. HARPER: We believe that there are equitable 4 non-damages type relief that are available for certain kinds of 5 things available from this Court. 6 THE COURT: But I'm talking about this particular 7 situation, in which the money never came into the Treasury in 8 the first place, and the Treasury cannot tell you whether or not 9 the third party made the payment to the Indian. But what's to 10 disgorge? 11 MR. HARPER: Your Honor, I will say, as we have for a 12 long time, that there are instances when the final remedy will 13 ultimately, or perhaps may need to be sought in a different 14 Court. We understand that. But the vast majority of remedies 15 are available in equity in this Court. 16 The restatement on Trust makes it very clear that most 17 of the remedies available to a beneficiary are equitable in 18 nature. And the only exclusion is when you have a sum certain 19 due, and therefore it is then money damages and it's legal 20 relief that is available. 21 And there may very well be that, in the failure to 22 account or in the accounting itself, that there is revelations 23 regarding damages, and that ultimately, if that is the case and 24 that is the only available remedy for that specific wrong, then 25 we would need to bring a subsequent action or get that aspect 0068 1 transferred, or whatever the process may be. 2 But that is not to say that we still don't have the 3 right to the accounting and the revelation of all the 4 information from our Trustee in order to determine what is the 5 most appropriate remedy for that particular and all other 6 breaches of Trust. And that's what we're saying we're seeking 7 in this litigation. To the extent that they can account, great. 8 Let me give you another example of an equitable remedy 9 that we could seek. Maybe there is a place where they failed to 10 collect $100 from a certain oil company. In that circumstance, 11 a beneficiary has a right to enforce what's called the duty of 12 the trustee to enforce claims. And if they have that duty, as 13 all other trustees do, and we believe they do, then we could 14 seek this Court to order that they go bring a third party action 15 against that person. 16 Now, I'm just saying that there are many options -- 17 THE COURT: Wait a minute. Wait a minute. There's a 18 whole Trust management issue, whole area of this thing that I 19 don't think we're talking about trying in October, this business 20 of, did you collect the money you should have? Did you lease 21 the land for as much as you should have leased it for? Did 22 you -- you know, I thought it was understood that that was a 23 different piece of this whole case than the Cobell case that 24 we're talking about here. 25 MR. HARPER: I'm not sure I fully understand the 0069 1 question. 2 THE COURT: You fully understand it better than I do, 3 Mr. Harper, so you're in a teaching mode here. 4 MR. HARPER: Your Honor, we believe that the October 5 trial -- and we would appreciate the opportunity to provide the 6 Court with a memorandum setting forth how we get from here to 7 there in a way that could dispose of the vast majority of issues 8 in this litigation. We believe that that is entirely possible, 9 this Court, exercising its inherent equitable authority in a 10 Trust case, and we would propose to do that. And it would 11 address issues such as that. 12 THE COURT: That's what I thought we were going to 13 start to do today. But if you want to take another bite of that 14 apple and let me have that, the sooner the better. 15 MR. HARPER: We would be prepared to file that, and at 16 the same time address the issues of scope that we discussed 17 earlier today, the scope of the accounting and the exclusions 18 that the government is making contrary to law. 19 THE COURT: When can you do that? 20 MR. HARPER: Could I consult? 21 (OFF THE RECORD.) 22 MR. HARPER: We would like to do it in two separate 23 briefs, within two weeks. 24 THE COURT: You mean, both brief in two weeks? 25 MR. HARPER: Both briefs in two weeks. 0070 1 THE COURT: I can't quarrel with that. By the way, for 2 both sides, next time we have one of these hearings, I'm going 3 to impose kind of a no-fly zone about four days ahead of time. 4 Because documents that come in late on Friday, over the weekend, 5 Monday morning, I mean, we scramble and do the best we can to 6 catch up with them, but there's no way we can absorb everything 7 that you-all file at the last moment. 8 All right. So you're going to file two briefs in the 9 next two weeks which are going to address generally -- just say 10 it again. 11 MR. HARPER: I think the first brief would set forth 12 the ways in which the government's proposed accounting, what 13 they've done and what they intend to do, excludes the vast 14 majority of beneficiaries that have a right to an accounting, 15 and why that is contrary to law. 16 And then discuss other issues around that accounting 17 duty; you know, what is the nature and scope of it, why is that 18 the nature and scope, what is the law of the case with respect 19 to it, things of that nature. 20 And the second would be a memorandum in which we talk 21 about where we are now, and how we get to a place where we can 22 utilize that October trial to resolve the vast majority of 23 issues in this litigation through certain kinds of evidentiary 24 proceedings and legal issues that will be raised and addressed 25 in that proceeding. 0071 1 THE COURT: All right. And how much time -- the 2 government is going to get that in a couple of weeks. Do you 3 want a couple of weeks to respond? 4 MR. KIRSCHMAN: Sure, Your Honor. Yes, we can meet 5 that. 6 THE COURT: Today is May the 14th. Plaintiffs will 7 file a couple of briefs on May 28th. Defense has until 8 June 11th to file whatever they want to file. I don't want any 9 replies. We will meet again on June 18th at 3:00 o'clock, and 10 talk about it. Okay? 11 MR. HARPER: Thank you, Your Honor. I think Mr. Dorris 12 to speak on the discovery issues. 13 THE COURT: I know. I know he wants to talk about 14 discovery. He's got an uphill fight. 15 MR. HARPER: Thank you, Your Honor. 16 MR. DORRIS: Your Honor, our view of discovery is not 17 broad. 18 THE COURT: Excuse me. Let the record reflect the 19 judge laughed. 20 MR. DORRIS: And I was serious with what I said with 21 respect to between here and October. It falls into two basic 22 categories, first with respect to the beneficiaries that are not 23 even going to be included in the accounting that the government 24 plans to do. So in other words, we now know that the government 25 is not even planning to do an accounting for them. 0072 1 We would want discovery that's geared toward -- we 2 think largely the briefing will indicate whether they should or 3 should not have done that accounting, but then we need discovery 4 on what the appropriate remedy to help this Court fashion a 5 remedy by which you would have a basis to restate what those 6 accounts should have been. So that's the first area. 7 The second area is to then concentrate on a subset of 8 the claims such as the Court suggested earlier today, and have 9 some discovery on what the accounting that has been done on 10 those, so that we can better understand what has been done so 11 that we can test that with respect to the October 10th hearing. 12 Now, at this point, obviously, what we would prefer 13 would be some of the land-based accounts, because that's the 14 bulk of what they're going to do. That's the bulk of what's at 15 issue in terms of the nature and scope of the accounts. There's 16 much more involved in those. 17 So to some extent, the discovery that we want to seek 18 on that has to do with analyses that they have referred to in 19 their quarterly reports with respect to land-based work that 20 they've done so far. So there are a number of analyses there 21 that we need to get a copy of, and perhaps take a deposition or 22 with the of. 23 And then, if we can determine from the government when 24 they can have some of those land-based accounts done, we would 25 want some limited discovery with respect to what those show so 0073 1 that we understand what has and has not been done with respect 2 to it. 3 So that's the scope of the discovery that we would want 4 leading up to the October hearing. 5 THE COURT: Well, I did enough discovery when I was 6 practicing law to know that what you call limited discovery 7 could, as Mr. Kirschman says, eat up most of the time that we 8 all have to get ready for this trial in October. I don't want 9 that to happen. That doesn't make any sense to me. 10 You know, this is a bench -- to the extent we're going 11 to call it a trial, let's call it a trial. I made light of that 12 in this order. I said you can call it whatever you want to; you 13 can call it a hearing, you can call it a trial, you can call it 14 a proceeding. I don't care what you call it, but there are 15 going to be witnesses in that witness chair there, and you're 16 going to be asking questions of them. And that, it seems to me, 17 is discovery. That is the challenge that you want to do. 18 I don't see the point, in a bench proceeding like this, 19 of getting people in conference rooms and going over their 20 documents with them for three days, and objecting to each 21 other's questions, and then putting them on the witness stand 22 and do the same thing again and say, "Well, didn't you say on 23 June 14th this, and now you're saying that?" That's what this 24 all descends into. I don't see the point of it. 25 MR. DORRIS: I hear what you say, Your Honor. With 0074 1 respect to documents, though, that may relate to those 2 witnesses' testimony, I must say, it's -- it goes much more 3 efficiently here in front of you if we have those prior to the 4 trial. 5 THE COURT: That's true. That may be what the -- you 6 know, the government keeps calling this an APA proceeding. In 7 an APA proceeding, the normal routine of an APA proceeding is, 8 the government files something it calls an administrative 9 record. They haven't filed an administrative record in this 10 case, have they? 11 MR. KIRSCHMAN: No, sir. 12 THE COURT: What would it look like, do you have any 13 idea? 14 MR. KIRSCHMAN: Yes. It would be the documents 15 prepared by Interior related to the historical accounting. It 16 would be documents prepared by their experts that Interior has 17 used to determine how to proceed, documents of those sorts. 18 And it goes back to 2003. The 2003 accounting plan 19 addressed many of these same parameters. These are not new. 20 These aren't exclusions as much as interpretations of the Act, 21 and they were all presented in 2003. 22 So the paper record will consist of documents compiled 23 within the Department of Interior that address the rationale in 24 2003 up to the present, including the adaptations that will be 25 represented in the 2007 accounting plan. 0075 1 THE COURT: Well, if you want to prepare -- in the 2 absence of something called an administrative record, if you 3 want to prepare a, you say not broad request for production of 4 documents, go ahead. 5 MR. DORRIS: Okay. 6 THE COURT: Now, it will be subject to objections, and 7 I may call a close game on the objections. I do not want this 8 to devolve into a discovery fight. I don't think discovery is 9 the core of what we're all about. I think you-all know enough 10 about this, about what Interior is doing already, that you can 11 make some pretty cogent challenges to what their witnesses are 12 going to say about their accounting in October without spending 13 the whole summer doing discovery. 14 MR. DORRIS: Your Honor, you've scheduled a June 18, I 15 think, hearing? 16 THE COURT: Yes, sir. 17 MR. DORRIS: When should we have our discovery filed, 18 so that the response is made before that hearing, so that's an 19 issue -- I assume that would be an issue the Court would want to 20 take up that day. 21 THE COURT: How about the day after tomorrow? You know 22 what you want. 23 MR. DORRIS: Well, it would be helpful if we could have 24 until the end of the week, at least. 25 THE COURT: You've got until the end of the week. But 0076 1 the government's objections will be due before June 18th, and 2 we'll talk about it -- that's one of the things we'll talk about 3 on June 18th. 4 MR. DORRIS: Thank you, Your Honor. 5 MR. KIRSCHMAN: Your Honor, just so I'm clear to the 6 Court, we anticipated filing this administrative record I've 7 been talking about subsequent to the accounting plan, and it may 8 address the documents that Mr. Dorris is making reference to 9 that they believe they need. 10 THE COURT: Well, then, that will be your response. 11 MR. KIRSCHMAN: Just so we're on the same page, I 12 wanted to be clear on that. 13 And Your Honor, on June 18th, will we then be arguing 14 the merits of the motions as well as any other scope issues? 15 THE COURT: The merits of what motions? 16 MR. KIRSCHMAN: The two briefings that the plaintiffs 17 will be filing and we'll be filing. 18 THE COURT: I would hope so. 19 MR. KIRSCHMAN: All right. Just to be clear. 20 THE COURT: I would hope so. I mean, what I'm trying 21 to do is sneak up on packaging this October hearing so that we 22 have some idea of what we are going to do in October, and what 23 we're going to get done between -- what legal rulings can be 24 made, if any, between now and then. 25 So far, there's still a lot of mist out here, but I 0077 1 hope we'll progressively clear some of it away. 2 MR. KIRSCHMAN: Your Honor, will there be an order from 3 the Court before the June 18th hearing? 4 THE COURT: Do you need one? 5 MR. KIRSCHMAN: Well, if I could, Your Honor, I 6 mentioned before narrowing the scope of the subject matter 7 related to both the Department of Treasury's involvement and 8 fixing the system, the prospective work of the Department of the 9 Interior. 10 THE COURT: I do not anticipate that the October 11 hearing will include either the Department of the Treasury or 12 fixing the system. I will hear -- whoop, they're on their feet. 13 MR. KIRSCHMAN: That doesn't mean anything, Your Honor. 14 THE COURT: I know. 15 MR. DORRIS: May I be heard, Your Honor? 16 THE COURT: Yes, of course. 17 MR. DORRIS: Your Honor, we think the Department of 18 Treasury's fiduciary duties are at issue in the October hearing. 19 THE COURT: I understand that. They're an issue in the 20 case, yes. 21 MR. DORRIS: But they are an issue with respect to what 22 the issues that we would be addressing, or at least I think the 23 Court has indicated it is addressing in October. That is where 24 the account actually is, one of the main accounts. 25 So to take Treasury out of it seems to me that we're 0078 1 bifurcating essentially the collective fiduciary duties that the 2 trustee delegates have, and we would ask the Court to not take 3 the Department of Treasury's fiduciary duties off the table. 4 THE COURT: All right. I won't take them off the 5 table, and I'll expect to hear about that subject in one of the 6 two briefs that you-all are going to file in the next two weeks. 7 MR. DORRIS: Thank you, Your Honor. 8 THE COURT: Mr. Quinn, you look like you want to be 9 heard. 10 MR. QUINN: If we're finished with the planning for 11 June 18, Your Honor, I just wanted to clarify where we left off 12 on the order with respect to fees. 13 In your April 27th order, Your Honor, you invited the 14 plaintiffs to address several specific issues, and expressly 15 said that it wasn't necessary for them to address matters of 16 excessive hours that were claimed with respect to work. 17 I didn't know whether Your Honor is contemplating in 18 terms of plaintiffs resubmitting a statement, that we readdress 19 any excessive hours claims, or how you would like to do that. 20 THE COURT: I've tried to make it clear that I'm simply 21 not going to start carving up the numbers of hours. I'm just 22 not. The bills seem enormous to me, frankly. But I'm very 23 anxious to get this fee thing done, over, and behind us. 24 And by the way, the Justice Department should be 25 interested in a decision that came down from the Second Circuit 0079 1 a couple of weeks ago on attorneys' fees. The Second Circuit 2 says, "The word Lodestar no longer has any meaning in the law," 3 and they've knocked the Lodestar idea completely out of 4 attorneys' fees in the Second Circuit. I'm assuming you're 5 going to be attempting to apply that circuit by circuit. 6 MR. QUINN: I'll have to read up on it, Your Honor. 7 But with respect to plaintiffs' resubmission, to the 8 extent they choose to resubmit, will we have an opportunity to 9 go back, in terms of the extra billing or the double matter 10 billing that they may attempt to clarify, will we have an 11 opportunity to respond to that if we see a problem with that? 12 THE COURT: You can respond to anything you want to, 13 but I think I've tried to make clear what my rulings are on the 14 last round, and I'm not going to have a third round. 15 MR. QUINN: Thank you very much, Your Honor. 16 MR. GINGOLD: Your Honor, just one point? 17 THE COURT: On Lodestar? 18 MR. GINGOLD: Yes. 19 THE COURT: Yes, sir. That was just a shot across the 20 bow, Mr. Gingold. The Lodestar will apply to past -- 21 MR. GINGOLD: Your Honor, in this circuit, this circuit 22 has never adopted Lodestar. It's been a common fund doctrine. 23 It is the law of this circuit. 24 THE COURT: Well, there are common fund cases, and 25 there are not common fund cases. Your assertion is that this is 0080 1 a common fund case. 2 MR. GINGOLD: Yes, Your Honor. It's pursuant to 3 Swedish Hospital. Correct. 4 THE COURT: But there's no common fund in these fee 5 petitions that we've been talking about. 6 MR. GINGOLD: No, no, not in these, Your Honor. With 7 regard to the case itself, with regard to the restatement and 8 correction of the accounts. 9 THE COURT: Well, you're putting the cart way in front 10 of the horse. 11 MR. GINGOLD: No, I just want you to -- this circuit 12 has never adopted Lodestar. It has adopted common fund, and it 13 was a two-to-one decision, Your Honor, but that is a decision of 14 this circuit. 15 THE COURT: Okay. Thank you. Anything further? I 16 should never ask that question when there are 15 lawyers sitting 17 in front of me. 18 There is nothing further. We're adjourned. 19 (Proceedings adjourned at 5:12 p.m.) 20 21 22 23 24 25 0081 1 CERTIFICATE OF OFFICIAL COURT REPORTER 2 3 I, Rebecca Stonestreet, certify that the foregoing is a 4 correct transcript from the record of proceedings in the 5 above-entitled matter. 6 7 8 9 _______________________________ _________ 10 SIGNATURE OF COURT REPORTER DATE 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25