<< COB00001 >>
IN THE ~?JMTED STATES DISTRICT COURT
FOR TIlE DISTRICT OF COLUMBIA
	ELOUJSE PEPION COBELL, et al.,	)
		)
	Plaintiffs,	)
		)
	V.	)	Case No. l:96CV01285
)	(Special Master-Monitor
)	Joseph S. Kieffer, III)
GALE A. NORTON, Secretary of the Interior, ~ ~L)
		)
	Defendants.	)
INTERIOR DEFENDANTS' STATEMENT REGARDING DISCOVERY
	'fhe Secretary of the Interior and the Assistant Secretary - Indian Affairs ("Interior
Defendants" or "Interior"), state the following in response to Special Master-Monitor's letter
dated September 29, 2002, regarding whether Interior Defendants have a right to discovery and
the appropriate subject matter of discovery regarding Phase 1.5.
Introduction
	By letter dated September 29, 2002, the Special Master-Monitor requested (at 2) Interior
Defendants to brief the issues of whether they "have some right to discovery ~ that there is
some meaningful discovery for them to take in relation to the trust reform issues to be addressed
in the Phase 1.5 trial that will deal with the historical accounting and their fiduciary obligations
to 'fix the system' and how they propose to do it." The letter further states that such a showing is
needed in order to rule on Interior Defendants' outstanding motions to compel discovery.
<< COB00002 >>
Statement of Position
I.	Interior Defendants' Ri2ht to Discovery
	In considering whether Tnterior Defendants have a right to conduct discovery at this
juncture of the casc, the Special Master-Monitor focused on the following language in the Court's
September 17, 2002 Memorandum Opinion ("Memorandum Opinion" or "Mem. Op.") (at 262):
Accordingly, the Court will permit plaintiffs full discovery on
matters that they otherwise would not have been able to explore
prior to this decision. While the Court will thus expand the scope
of discovery for the plaintiffs, the Special Master-Monitor shall
ensure that such discovery does not unreasonably interfere with the
defendants' ability to develop their plans for submission to the
Court.
See Letter from Joseph S. Kieffer, rn, to Sandra Spooner (9/29/2002) at 1-2. The Special
Master-Monitor asked for comment on whether that statement, by not mentioning Defendants'
discovery, meant to preclude discovery by Defendants, or whether that statement simply means
that "defendants still have some limited right to discovery that they shared with defendants (sic)
prior to the Court' s September 17, 2002 Memorandum and Order."' Id.
	Other language in the Court's September 17, 2002 Memorandum Opinion, and prior
orders in this case, reveal that the above-quoted language from the Memorandum Opinion merely
lifted a prior limit on Plaintiffs' discovery, and is irrelevant to Defendants' discovery. Language
in the Memorandum Opinion (at 26 1-62) immediately preceding the above-quoted passage
reveals that the Court was merely lifting a prior restriction on Plaintiffs' discovery imposed by the
Court's December 21, 1999 opinion and order:
	'We assume that the Special Master-Monitor's letter contains a typographical error, and
that the phrase "that they shared with defendants" should read "that they shared with plaintiffs."
-2-
<< COB00003 >>
At the time the Court issued its Phase I trial decision [on December
21, 1999], the Court found that it was sufficient for the defendants
to file quarterly status reports and for p1aintiff~ to then 'petition the
court to order defendants to provide further information as needed
if such information cannot be obtained through informal requests
directly to defendants.' Cobell V [Cobell v. Babbitt, 91 F. Supp. 2d
I ~D.D.C. 1999)] at 59.
Thus, the Court's December 21, 1999 opinion and order precluded Plaintiffs from conducting
discovery into the matters covered by the quarterly reports submitted by Defendants, unless
Plaintiffs first petitioned for and obtained leave of court. The September 17, 2002 Memorandum
Opinion merely lifted that restriction. But the Court's December 21, 1999 opinion and order did
not impose restrictions on the Defendants' discovery. Thus, the September 17, 2002
Memorandum Opinion's silence regarding Defendants' discoveiy cannot reasonably be
interpreted to mean that Defendants' discovery is restricted.
	Another order in this case demonstrates that Defendants already had the right to conduct
discovery prior to September 17, 2002 and, therefore, did not require an express allowance of
discovery in the September 17, 2002 Memorandum Opinion. The opinion and order entered by
Special Master Alan Balaran on September 28, 2001 (filed October 1, 2001) (the "Special Master
Discovery Order"), a copy of which is attached hereto, (at 11-12) states:
To help chart a manageable course for the parties to follow, the
Special Master intends this order to provide a roadmap for future
discovery in this case which will hopefully facilitate this litigation
to a just and achievable conclusion. At this time, the following are
permissible areas for Phase H discovery:
Discovery pertaining to the "nature or
amount of trust property," j~, specific
beneficiaries or lands;
Discovery pertaining to the agencies'
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<< COB00004 >>
decision-making process regarding its
methods of accounting;
•	Discovery pertaining to statutes of
limitations and thc scope of the plaintiff
class; and
•	Discovery pertaining to the agencies'
compliance with extant court orders,
particularly to the question of continued
delays in implemncntation of the District
Court's December 1999 Order.
The Special Master Discovery Order (at 12 n.6) also stated that the above list "is not intended to
be exhaustive as other areas of discovcry may be addressed upon petition by the parties."
Although the Special Master Discovery Order referred to "Phase II discovery," Defendants'
discovery on the applicable topics is equally applicable to Phase 1.5, as we show in part II,
belo~v.
	The Special Master Discovery Order's list of permitted discovery topics pertains to
discovery allowed to Defendants as xvell as to Plaintiffs. For example, the third topic ("statutes
of limitations and the scope of the plaintiff class") pertains to defenses and arguments of
Defendants, because, for example, Plaintiffs would have no reason to conduct discovery as to the
"scope" of their own class. Thus, the Special Master Discovery Order obviously contemplated
and permitted discovery by Defendants.
	Finally, the Federal Rules of Civil Procedure ("Rules" or "Rule") allow all parties to
conduct discovery. See Rule 26(b)(1) ("Parties may obtain discovery regarding any matter, not
privileged, that is relevant to the claim or defense of any party"). The right to discovery does not
depend upon the Court expressly allowing it; rather, the right to discovery exists unless the Court
-4-
<< COB00005 >>
explicitly limits or precludes it. Because the goal of discovery is to furthcr the search for truth, it
should be allowed to proceed. See Odone v. Croda Int'l PLC, 950 F. Supp. 10, 12 (D.D.C. 1997)
("discovery should bc liberal and broad in furtherance of the search for truth"); PHE. Inc. v.
Department of Justice, 139 F.R.D. 249, 256 (D.D.C. 1991) (same). The Court's mere silence on
the subject of Defendants' discovery cannot possibly be read to abrogate Defendants' discovery
rights.
	In summary, the Court's December 21, 1999 opinion and order imposed a restriction upon
Plaintiffs' (but not Defend ants') discovery. The September 17, 2002 Memorandum Opinion
merely lifted that restriction, but had no effect on Defendants' discovery. Pursuant to the Special
Master Discovery Order, Defendants already had a right to discovery. This is consistent with the
Rules, which automatically allow all parties to conduct discovery. Absent a limitation imposed
by the Court (and no such limitation appears in any of the Court's orders), Defendants' right to
discovery remains intact. Denial of Defendants' right to full and fair discovery before trial would
be a fundamental denial of due process, which cannot stand.
	TI. Appropriate Areas of Discovery
	While Interior Defendants do not concede that their discovcry should be limited only to
the issues pertaining to the subject matter of Phase 1.5, they certainly should, at the very least, be
allowed discovery on the many topics relevant to Phase 1.5. First, the topics that the Special
Master Discovery Order (quoted above) already permitted should remain open to discovery by
Defendants. For example, topic number 3 ("discovery pertaining to statutes of limitations and
the scope of the plaintiff class") is highly relevant to Phase 1.5. Phase 1.5 involves, among other
things, the Court's "approving an approach to conducting a historical accounting of the DIM trust
-5-
<< COB00006 >>
accounts." Mcm. Op. at 242.
	One of the key issues involved in an historical accounting is whether the time period
covered will be limited by the statute of limitations. The Court's Deccmbcr 21. 1999 opinion
expressly held that this issue remains to be dccided. 91 F. Supp. 2d at 32 n.22. The plan for
"conducting a historical accounting" would be altered dramatically if the time period for the
accounting were limite(l by the statute of limitations. Therefore, resolution of the statute of
limitations issue is vital to Phase 1 .5, and Defendants should be allowed discovery on this
subject. Indeed, the Court acknowledged this in its November 5, 1998 opinion, Cobell v.
Babbitt, 30 F. Supp. 2d 24, 45 (D.D.C. 1998), discussing some factual points pertinent to the
statute of limitations issue, and specifically stating "Ijtjlhe defendants remain free to raise their
statute of limitations defense at the summaiyjudgrnent stage, once the parties have completed
their discovery of facts that go to the plaintiffs' knowledge and have had the opportunity to
adequately brief the issues presented." (emphasis added).
	Similarly, issues relating to the "scope of the plaintiff class" referenced in the Special
Master Discovery Order are also relevant to a Phase 1.5 trial. The case has been certified as a
class action under Rule 23(b)(l)(a) and (b)(2), so one key issue for trial will be whether the plan
for an historical accounting and for fixing the system adequately addresses the interests of all
class members. This issue necessarily requires discovery to determine and verify the scope of the
class and to evaluate how individual class members would be treated by a particular approach or
method. Indeed, if class members are found to have differing circumstances such that some class
members' interests might be at odds with other class members in following a particular approach.
then review of the plans presented would have to take into account the competing interests of
-6-
<< COB00007 >>
separate subclasses.2 See ~enerallv Amehem Prod.. Inc. v. Windsor, 521 U.S. 591, 626 (1997)
(improper to allow "named parties with diverse medical conditions. . . to act on behalf of a
single giant class rather than on behalf of discrete subclasses"). These considcrations can only be
fairly evaluated through full discovery. Lipton v. MCI Worldeom. Inc., 135 F. Supp. 2d 182, 192
(D.D.C. 2001) ("propriety of a class action cannot be determined in some cases without
discovery, as for example where discovery is necessary to determine.. . a set of subclasses~).
	The following are additional topics that, although not part of the Special Master
Discovery Order, are profoundly relevant to Phase 1.5, and, therefore, should be permitted topics
of discovery by Defendants:
•	Disclosure of, and facts surrounding, any plan for an accounting or for "additional
remedies with respect to the fixing the system portion of the case" (Memorandum
Opinion at 242) that Plaintiffs will present in connection with Phase 1.5.
•	Facts or contentions of Plaintiffs regarding the suitability, appropriateness and any
flaws they perceive in the methods and results of the Ernst & Young analysis of
the five named Plaintiffs' accounts, or any other methodology that Interior might
employ.
•	Documents and information that Plaintiffs have or of which they have knowledge
that would be useful or pertinent to preparation of a plan for an historical
	2lndeed, the Court retains the power to modify, amend or even decertify the class
notwithstanding its earlier grant of class certification. See Rule 23(c)(1) (certification order "may
be conditional, and may be altered or amended before the decision on the merits"); see generally
Walsh v. Ford Motor Co., 106 F.R.D. 378, 387 (D.D.C. 1985) ("any certification determination is
conditional and may be altered, expanded, subdivided, or vacated as the case begins to progress
toward an actual merits determination"), vacated on other grounds, 807 F.2d 1000 (D.C. Cir.
1986).
-7-
<< COB00008 >>
accounting or for additional remedies for fixing the system, and identification of
witnesses with such knowledge..
Discovery regarding expert witness testimony that Plaintiffs might present in
connection with Phase 1.5. If Plaintiffs expect to prove their proposed plan, or to
attack Interior Defendants' plan, by using expert testimony, Interior Defendants
are entitled to the full panoply of expert ~vitness discovery mandated by Rule 26.
Documents and infonnation pertaining to Plaintiffs' allegations concerning the
sums of money that they contend should be included within the historical
accounting.
Conclusion
	Neither the Court's September 17, 2002 Memorandum Opinion, nor any other order of the
Court, precludes discovery by Defendants with regard to Phase 1.5. On the contrary, other orders
in this case, as well as the Federal Rules of Civil Procedure, clearly contemplate discovery by
(continued on next page)
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<< COB00009 >>
Defendants. The topics listed above are plainly rclcvant to issues in Phase 1.5 in this case. For
the reasons stated, Defendants should be permitted discovery into these matters.
Respectfully submitted,
ROBERT D. McCALLUM
Assistant Attorney General
STUART E. SCHWFER
Deputy Assistant Attorney General
J.	CHRISTOPHER KOHN
Director
	/	k.~	,~'
—	~ )
(v ~
SANDRA P. SPOONFIt
(D.C. Bar No. 261495)
Deputy Director
JOT-IN T. STEMPLEWICZ
Senior Trial Attorney
DAVD J. GOTTESMAN
MICHAEL J. QUINN
Trial Attorneys
Commercial Litigation Branch
Civil Division
P.O. Box 875
Ben Franklin Station
Washington, D.C. 20044-0875
(202) 514-7194
Dated:	October 1, 2002
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<< COB00010 >>
CERTIFICATE OF SERVICE
	I declare under penalty ofperjuiy that, on October 1, 2002 1 served the foregoing Interior
Defendants Statement Regarding Discovejy by facsimile, in accordance with their written
request of October 31, 2001 upon:
Keith Harper, Esq.	Dennis M Gingold, Esq.
Native American Rights Fund	Mark Kester Brown, Esq.
1712 N Street, N.W.	1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20036-2976	Ninth Floor
(202) 822-0068	Washington, D.C. 20004
	(202) 318-2372
and by U.S. Mail upon:
Elliott Levitas, Esq.
1100 Peachtree Street, Suite 2800
Atlanta, GA 30309-4530
Copy by Facsimile and U.S. Mail upon:
Alan i.~. Balaran, Esq.
Special Master
1717 Pennsylvania Avenue, N.W.
12th Floor
Washington, D.C. 20006
(202) 986-8477
By Hand upon:
Joseph S. Kieffer, III
Special Master Monitor
420 7th Street, N.W.
Apartment 705
Washington, D.C. 20004
(202) 478-1958
Kevin P. Kingstox~/
<< COB00011 >>
TI~ IJN1TW STATES DISTRICT COURT
	FOR TIlE DISTRICT OF COLIJMBIA	F I L E D
	ELOIJISIE PEPION COBELL, et. al.,	)	OCT 1. zoai
NA~4C1 ~?f~ W~JT~G1Ct~ CLS~~
			LL& ~ WJ~
	Plaintiffs,	)
		)	Civil Action NO. 96-1285 (RCL)
V.
GALE A. NORTON, et al.,
)
Defendants.
OPINION AND ORDER
	The questions currently before the Special Master are: (1) what impact, if any, did the
District of Columbia Court of Appeals opinion in Cobell v. Nortor' 240 F.3d 1081 (D.C. Cir.
2001) have on the scope of discovery in this litigation and (2) whether said discovery is limited
to a review of the administrative record. See March 12, 2001 Letter from Special Master to
Philip Brooks and Dennis (3ingold at 1. The parties, on April 6 and April 25, 2001, filed
simultaneous briefs and responses setting out their respective positions on these questions.
	Before deciding these issues, a btiefrecapitulatiOu. of the history of this case and its
current procedural posture i~ in order.
BACKGROUND
	On June tO, 1996, plaintiffs brought a class action on behalf of all present and former
Individual Indian Money ("ELM") account beneficiaries against the X.I.S. Departments of Intetior
and Treasury in their capacities as trustee-delegates for the federal government with respect to
Indian lands, in. general, and 1TM accounts, in particular. On May 5, 1998, the District Court
bifurcated the case into "Phase I" and "Phase if' — speciL~irig that Phase I would focus primarily
on "fixing the system" or "reforming the nianagernent and accounting of the IIM trusts to meet
Attachment A
Interior Defendants Statement
<< COB00012 >>
thc government's fiduciary responsibilities," Cobell V. Norton, 240 F.3d at 1093, and Phase 11
would address "the historical accounting of the accounts." Id.
	Adjudication of Phase I took place between June 10, 1999 and July 23, 2001 — at the
conclusion of which the Court: (1) held both agencies in breach of their fiduciary duties see
Cobell v. Babbitt, 91 F.Supp.2d 1, 48-50 (D.D.C. 1999); (2) "remand[edj the case for further
agency consideration in harmony with the court's holding," id. at 54-55 n. 36; and (3) ordered
defendants to "promptly come into compliance" by, among other things, establishing written
policies and procedures to "rectify th[ose] breaches." Id. at 58. To ensure compliance, the
District Court retained continuing junsdiction over the case for five years and ordcred the
defendants to submit quarterly reports dctailing their progress toward rectifying the identified
breaches of trust. Id. at 59.
	On February 23, 2001. the D.C. Circuit unanimously affirmed the District Court's
opinion and agreed that "[t]he Interior Department has failed to discharge the fiduciary duties it
owes to JIM bcncflciaries for dccades" and that "[d]espite passage of the 1994 Act, the
Department is still unable to execute the most fundamcntal of tnist duties — an accurate
accounting." At the same time, the Circuit cautioned the District Court to "be mindful of the
limits of its jurisdiction." Cobell v. Norton, 240 F.3d at 1110, and to afford defendants
"sufficient discretion in determining the prccise route they take, so long as this threshold is met."
liL,at 1106.
	On March 12, 2001, the Special Master directed the parties to brief the impact of this
decision on both existing and future discovery obligations. The parties' responses and the
Special Master's analysis are set out below.
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<< COB00013 >>
ANALYSIS
	Before ruling on the questions peculiar to Phase H litigation, it is necessary to touch upon
those outstanding requests which continue to bear directly on Phase I and those which have
implications for both Phases I and II.
	In keeping with its decision to maintain judicial oversight over defcndants' remediation
efforts, the District Court, on December 12, 1999, imposed a mechanism for defendants to
providc "any additional information requested by the court or tto] supplement defendants'
submissions." Cobell, 91 F.Supp.2d at 56. The District Court further contemplated that any
contention which arose from this informal flow of information triggered plaintiffs' right to
"petition the court to order defendants to provide further information as needed." Id.
	On March 8, 2001, the Special Master, in response to Defendants' Motion for Protective
Order To Postpone by Ten Days One Deposition and to Limit the Scope of All Depositions
Currently Scheduled to Phase II Issues, clarified the Court's holding and ruled that plaintiffs could
not utilize the formal discovery process of Phase II to seek information relating to the previously
adjudicated "fixing the system" issues but were free to inquire into matters which may be relevant
to both Phase I and Phase 11 including,
the integrity of accounting information stored in existing systems; information
regarding what records are available — both paper and electronic; information
regarding where and how that data is stored — mg., TAAMS, TFAS, IRMS, LRIS,
etc.; information regarding the policies and procedures that are currently being
utilized to manage the information necessary to perform an accounting;
information regarding which assets belong to which beneficiaries that implicates
data integrity and probate issues; information relating to the background and
abilities of those Interior employees charged with input, handling and storage of
data necessary to perform an accounting.
-3-
<< COB00014 >>
March 8, 2001 Report and Recommendation of the Special Master Concerning Defendants'
Motion for Protective Order to Postpone by Ten Days One Deposition and to Limit the Scope of
All Depositions Currently Scheduled to Phase II Issues, at 4.
	The D.C. Circuit's opinion effects no change on these rulings.1 Indeed, the Circuit gave
its explicit blessing to the District Court's retention ofjurisdiction~ see Cobel], 240 F.3d at 1109,
("[w]hile a court's retaining ofjurisdiction of five years may be unusual, federal courts regularly
retain jurisdiction until a federal agency has complied with its legal obligations") and to its
imposing an obligation to regularly report rernediation efforts (federal courts also "have the
authority to compel regular progress reports in the meantime.") 14 (citations omitted). As to the
scope of the informal discovery defendants are to provide during the retention period, this issue
~vas never contested on appeal and, therefore, stands unopposed. See Williamsburg Wax
Museum. Inc. v. Historic Figures. Inc., 810 F.2d 243, 250 (D.C.Cir. 1987) ("Under law of the case
doctrine, a legal decision made at one stage of litigation, unchallenged in a subsequent appeal
when the opportunity to do so existed, becomes the law of the case for futurc stages of the same
litigation, and the parties are deemed to have waived the right to challenge that decision at a later
time").
	As to those discovery requests unique to Phase II proceedings, the initial question to be
addressed is whether this ease is governed by traditional "trust accounting" principles or by the
strictures of the Administrative Procedure Act ("APA") (5 U.S.C. §§ 701 et seq.).
	Similarly undisturbed is defendant's obligation to produce all documents responsive to
paragraph 19 of the court's November 27, 1996 First Order for Production of Information which
requires defendants to produce "[a]lI documents, records, and tangible things which embody,
refer to, or relate to TIM accounts of the five-named Plaintiffs or their predecessors in interest."
-4-
<< COB00015 >>
	Plaintiffs urge that Phase II be strictly construed in accordance with settled trust principles
that require a fiduciary to furnish complete infonnation to its beneficiaries regarding the trust
being administered — including all information needed to protect those beneficiaries' rights. See
Plaintiffs' Memorandum Regarding Scope of Discovery ("Plaintiffs' Brief') at 4 (citing
Restatement (Second) of Trusts, §173 and Comment c)2; Plaintiffs' Response to Defendants'
Memorandum on the Scope of Discovery ("Plaintiffs' Response") at 1. So construed, plaintiffs'
request for access to trust information must be afforded maximum breath insofar as defendants are
"under a duty to the beneficiary to give him ... complete and accurate information as to the
nature and amount of the trust property," Restatement (Second) of Trusts § 173, and "the
beneficiary is always entitled to such infonnation as is reasonably necessary to enable him to
enforce his rights under the trust or to prevent or redress a breach of trust." Restatement (Second)
of Trusts, § 173, Conunent ci
	2 Restatement (Second) of Trusts § 173 (DUTY TO FURNISH INFORMATION)
provides:
The trustee is under a duty to the beneficiary to give him upon his request at
reasonable times complete and accurate information as to the nature and amount
of the trust property, and to permit him or a person duly authorized by him to
inspect the subject matter of the trust and the accounts and vouchers and other
documents relating to the trust.
	This practically unfettered right to such information has been held, for example, to
trump common-law doctrines which would normally shield information from disclosure — such
as the attorney-client privilege. $~ ~.g, Washin~ton-BaItimore Newspaper Guild. Local 35 v.
Washington Star Co., 543 F.Supp. 906, 909 (D.D.C. 1982) ("fiduciary exception" between
trustee and beneficiary not an "exception" to privilege but rather circumstance where no privilege
exists); See also Everett v. US Air Groun. Inc., 165 F.R.D. 1, 5 (D.D.C. 1995)(ERISA plan
beneficiary is "ultimate client"); Wildbur v. Arco Chemical Co., 974 F.2d 631, 645 (5th Cir.
1992) (attorneys' clients are the plan beneficiaries for whom the fiduciary acts); In re Lone
Island Li~htin~ Co., 129 F.3d 268, 272 (2nd Cir. 1997) (ERISA fiduciary may not use privilege
-5-
<< COB00016 >>
	Defendants, in contrast, argue that this case is both circumscribed and defined by the
Administrative Procedure Act and thus falls "squarely in the realm of traditional court review of
the administrative actions of the Executive Branch — a realm where discovery is, at best, higbly
unusual and always severely limited." Defendants' Response to Plaintiffs' Brief on the Effect of
the Recent Decision of the Court of Appeals on Further Discovery in This Case ("Defendants'
Respanse") at 2.
	From this standpoint, judicial review of Interior's conduct would be constrained by
substantial deference to the agency and its decision-making process and "discovery" would be
limited to review of the agency's "administrative record." See, ~ AMFAC Resorts. TIC. v.
U.S. Dept. of the Interior, 143 F.Supp.2d 7, 10 (D.D.C. 2001)("in cases brought under the APA
	judicial revicw is nom~ally confined to the administrative record"); Community for Creative
Non-Violence ~CCNV1 et al.. v. Lujan, 908 F.2d 992, 997 (D.C. Cir. 1990)(discovery of the
agency decision-making process is available in only two circums(ances: where "there has been a
strong showing ofbad faith or improper behavior," or "when such examination provides the only
possibility for effective judicial review and when there have been no contemporaneous
administrative findings")(citinQ Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 825
(1971)). Confining the scope of revie~v of agency action under the APA is grounded in the
principle that, as courts and the executive branch are constitutional equals in our system of
separation of powers, courts are ill-suited to impose their prerogatives on executive branch
to narrow fiduciary obligation of disclosure to plan beneficiaries); Martin v. Valley National
Bank of Arizona, 140 F.R.D. 291, 325 (S.D.N.Y. 1991)(same). See September 11, 2001 Opinion
and Order of the Special Master, at 6-11.
-6-
<< COB00017 >>
decisions. See San Luis Obisno Mothers for Peace v. NRC, 751 F.2d 1237, 1325 (D.C.Cir.
I9S6)(~~ banc)("judicial reliance on an agency's stated rationale and findings is central to a
harmonious relationship between agcncy and court, one which recognizes that the agency and not
thecourt is the principal decision-maker"). Hence, courts' review of agency actions is normally
limited, as a legal matter, to determining whether the decision was "(A) arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with law; (B) contrary to constitutional right,
power, privilege, or immunity; (C) in excess of statutory jurisdiction, authority, or limitations, or
short of statutory right; (D) without observance of procedure required by law; (E) unsupported by
substantial evidence . or (F) unwarranted by the facts to the extent that the facts are subject to
trial de novo" by the rcvicwing court." 5 U.S.C. §7O6.~
	~	Defendants' briefs are inconsistent regarding the necessity for compiling an
administrative record. In their opening brief they represent that, because the decision process
concerning method of accounting constitutes an "informal agency action" rather than a formal
adjudication or rulemaking which traditionally give rise to a formal administrative record, there
will be no administrative record compiled. See Defendants' Brief on the Effect of the Recent
Decision of the Court of Appeals on Further Discovery in This Case ("Defendants' Brief') at 12,
no. 9. In Defendants' Response, they argue, "[i~ollowing a final agency action that is ripe for
review, if they choose to challenge the action, Plaintiffs will be provided the administrative
record compiled by the agency." Defendants' Response at 8. Defendants' second position is
more in keeping with the clear law regarding informal agency actions. While such actions do not
give rise to a "formal" record, some record of the decision process is required. Florida Power &
Light Co. v. U.S. NRC 470 U.S. 729, 743-44 (1985) ("The task of the reviewing court is to
apply the appropriate APA standard of review, 5 U.S.C. § 706, to the agency decision based on
the record the agency presents to the reviewing court"). The administrative record of informal
agency action should include all documents that were considered by the agency in reaching its
determination, broadly defined. AMFAC, supra, 143 F.Supp.2d at 12-13 (citations omitted).
Indeed, if no such record is proffered, full discovery would be justified to create an evidentiary
record one sufficient to enable meaningful judicial review. Id. at 11, (citing Camo v. Pitts, 411
U.S. 138, 142-43 (1973)).
-7-
<< COB00018 >>
	In navigating behveen these seemingly irreconcilable positions, it is the opinion of the
Special Master that each party, while correct in the strictcst of legal contexts, presents a
perspective whose sole application to this case is both untenable and extreme.
	It is beyond dispute that the core of Phase TI concerns a trust relationship whose dominant
focus, at this point, is the historical accounting of the accounts. Cobell v. Norton, 91 F.Supp.2d at
31. As such, both legal precedent, in general, and this Circuit's opinion, in particular, state with
textbook clarity that, in actions between Indian trust beneficiaries and the government as
administrator of that trust, deference accorded agencies pursuant to ChevTon U.S.A. Inc. V.
NRDC. 467 U.S. 837 (1984) is supplanted by "the rule of liberally constniing statutes [and other
legal ambiguities] to the benefit of the Indians." Cobell, 240 F.3d at 1101 (puotine Albu~uerpue
Indian Rh~hts v. Luian, 930 F.2d 49, 59 (D.C.Cir. 1991). On that score, the Cobell panel
repeatedly emphasized the applicability of trust law, the stringent fiduciary duties owed by the
defendants to the plaintilTh, and the limits to traditional application of "APA deference." See e.g~,
Cobell v. Norton, 240 F.3d at 1101 ("we give the agency's interpretation 'careful consideration'
but 'we do not defer to it"')(citations omitted); id. at 1100 ("[tjhe trust nature of the federal
government's TIM responsibilities was recognized long before passage of the 1994 [Indian Trust
Fund Management Reform] Act [and] the most exacting fiduciary standards of the common law
[must be applied] in assessing the government's discharge of its duties")(citin~ Seminole Nation
v. United States, 316 U.S. 286, 297 (1942)); id. all 101 ("[tJhe general 'contours' of the
government's obligations may be defined by statute but the interstices must be filled in through
reference to general trust law"); hi. at 1099 ("the Secretary 'cannot escape his role as trustee by
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<< COB00019 >>
donning the rnantlc of administrator' to claim that courts must defer to his expertise and delegated
authority")(citacions omitted); ~ at 1104 (same).
	That being said, courts must be mindfiul of the limitations imposed by the Administrative
Procedure Act to judicial oversight of the conduct of federal agencies. The Cobell panel, for
example, took pains to delineate the contours of and exceptions to the overarching administrative
rule that "[ejourts owe substantial deference to agency prerogatives in fulfilling their legal
obligations, especially where Congress intervenes to address longstanding problems, as it did with
the 1994 Act." Cobell, 240 F.3d at 1096. Such deference took explicit form when the Circuit
first noted that "[tjhe district court explicitly left open the choice of how the accounting would be
conducted, and whether certain accounting methods, such as statistical sampling or something
else, would be appropriate," and then emphasized that, "[sjuch decisions are properly left in the
bands of administrative agencies." Cobell, 240 F.3d at 1104.
	Beyond these seemingly polarized perspectives, it is clear neither the principles of trust
law nor the principles of administrative law are unyielding. This Circuit has recognized multiple
exceptions to the standard rule of strict "record review" in APA cases. See Esch v. Yeutter, 876
F.2d 976, 991 (D.C. Cir. 1989)(recognizing eight distinct exceptions to the rule limiting judicial
review to the administrative record, and holding that where the procedural validity of defendant's
actions are "in serious question," extra-record information may be appropriate)(citing Stark &
Wald, "Setting no Records: The Failed Attempts to Limit the Record in Review of Administrative
Action," 36 Admin. L. Rev. 333, 345 (1984)); AMFAC Resorts v. DOI, 143 F.Supp.2d 7, 11 and
n. 5 (D.D.C. 2001) (Lamberth, J.) (noting four "well-established" exceptions to record review in
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<< COB00020 >>
this Circuit;5 Edison Electric Institute v. OSHA, 849 F.2d 611,618 (D.C. Cir. l988)(permitting
agency to supplement record with post hoc information, when responding to ncw argument raised
by plaintiff); CCNV, supra, 908 F.2d at 997-98 (recognizing two cxceptions to record review for
bad faith and inadequate record, but upholding denial of discovery)(citing Overton Park);
Commercial Dra0erv Contractors. Inc. v. United States, 133 F.3d 1,7 (D.C.Cir.1998)(same);
Eugene Buri~er Manacement Corporation v. United States Dept. ofHousin~ and Urban
Development, 192 F.R.D. 1, 12 (D.D.C. 1 999)(diseovery in APA case only permitted in two
circumstances noted above)(citing Saratoga Development Coj~~. v. United States, 21 F.3d 445,
458 (D.C.Cir. 1994)).
	While exceptions to the trust rule of open records are less plentifbl, the nile requiring
unfettered disclosure to beneficiaries is not absolute. For example, the Restatement (Second) of
Trusts, while asserting the right to information about the "nature and amount of the trust
property," limits beneficiaries' right to the broader category' of information i e that needed to
enable them "to enforce [theiri rights under the trust or to prevent or redress a breach of trust" and
to information which is "reasonably necessary" for those purposes. Restatement (Second) of
Trusts § 173, Comment c. See also Clifford v. U.S., 136 F.3d 144, 152 (D.C. Cir. 1998)(rejecting
beneficiaries' request to see trustee's sealed records, where beneficiaries are also defendants in
	~	The Court, on this point, held that additional evidence may be discovered and admitted
when: (1) there is a lack of administrative record or failure to explain administrative action,
frustrating judicial review; (2) discovery is necessary to establish whether the agency considered
all the relevant factors; (3) the agency may have excluded - either negligently or deliberately -
documents adverse to its decision; or (4) there is strong evidence of bad faith or improper
behavior by the defendant agency. See AMFAC Resorts v. DOI, 143 F.Supp.2d at 11 (citations
omitted).
<< COB00021 >>
lawsuit by trustee); White Mountain Apache Tribe of Arizona v. U.S., 9 CICt. I (1985)(granting
in part and denying in part beneficiaries' request for supplemental accounting and disbursement
records); U.S. v. Mert, 178 F.3d ]058, 1063 (9th Cir.1999)(rcversing lower court and holding that
where attorneys are consulted by trustees with respect to their personal liability, attorney-client
privilege precludes release of information); Faircioth v. Lundy Packing Co., 91 F.3d 648, 656-57
(4th Cir. 1996)(under EPJSA, beneficiaries not entitled to every document they seek even if they
"would enable theni to prevent or redress a breach of trust"); Martin v. Valley National Bank of
Arizona, 140 F.R.D. 291. 325-26 (S.D.N.Y. I 991)(jfiduciary exception" to privilege does not
attach where trustee and beneficiary have potentially conflicting interests).
	In short, neither body of law — trust law or AJ-'A law — constitutes an unyielding position
and neither should unequivocally dictate the scope of discovery in this case. It is the position of
the Special Master, therefore, that both, should guide future discovery in accordance with the
ruling articulated below. Insofar as the core of Phase II concerns a trust accounting, basic
principles of trust law should govern the release of basic trust records and, insofar as the
plaintiffs' challenges to the defendant agencies' processes of implementing an accounting
implicate basic principles concerning judicial review of agency decisions, APA law should govern
the discovery of the agencies' decision processes.
DISCOVERY RULING
	To help chart a manageable course for the parties to follow, the Special Master intends this
order to provide a roadmap for future discovery in this case which will hopefully facilitate this
litigation to a just and achievable conclusion. At this time, the following are permissible areas for
Phase II discovery:
—Il—
<< COB00022 >>
•	Discovery pertaining to the "nature or amount of trust property," j~, specific
beneficiaries or lands;
•	Discovery pertaining to the agencies' decision-making process regarding its
methods of accounting;
•	Discovery pertaining to statutcs of limitations and the scope of the plaintiff class;
and
•	Discovery pertaining to the agencies' compliance with extant court orders,
particularly to the question of continued delays in implementation of the District
Court's December 1999 Order.6
	By way of clarification:
(1) Trust records pertaining to "the nature and amount of trust property."
	In accordance with well-grounded principles obligating a trustee to provide beneficiaries
with "complete and accurate information as to the nature and amount of thc trust property in
trust," Restatement (Second) of Trusts, § 173, and Comment c, plaintiffs may seek the release of
records concerning the trust interests ofparticu]ar beneficiaries and inquire into the existence of
transactional documents related to those beneficiaries. However, the Special Master expects the
plaintiffs to invoke this right judiciously. A request for all records pertaining to all beneficiaries,
or the like, will be frowned upon and may well be denied on grounds of undue burden and
because such a request will cause even greater delay in the ultimate resolution of this case.7 As
plaintiffs have repeatedly pointed out, and both the District and Appellate Courts have recognized,
the consequences of agency delay are great. See Cobell v. Norton, 240 F.3d at 1109; Cobell v.
	6 This list is. not intended to be exhaustive as other areas of discovery may be addressed
upon petition by the parties.
	~	Documents related to pooled interest, however, may well be ~vithin the permissible
scope of discovery.
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<< COB00023 >>
Babbitt, 91 F.Supp.2d at 47. To the extent that a request for massive numbers of beneficiary
records interferes with the defendants' process of accomplishing the accounting, the Special
Master ~vill weigh the costs in terms of delay against the benefits to plaintiffs, in conformity with
local precedent. ~ Linderv. Department of Defense, 133 F.3d 17,24 (D.C.Cir. 1998)
("To the extent such information satisfies Rule 26's broad definition of relevance, the district court
may decline to order the agencies to search for that information only if the agencies satisfy their
heaxy burden of proving oppressiveness or establish some other recognized wound for modifying
or quashing subpoenas for relevant information").8
(2)	The AgenCies' Decision Process Regarding the Method of Accounting.
	Acknowledging that "supervision of the Department's conduct in preparing an accounting
may well be beyond the district court's jurisdiction," Cobell, 240 F.3d at 1110, the D.C. Circuit
observed that, "the choice of how the accounting would be conducted, and whether certain
accounting methods, such as statistical sampling or something else, would be appropriate .. . . are
properly left in the hands of administrative agencies." id. at 1104. In keeping with this
acknowledgment and the Circuit's general admonition to the District Court to remain "mindful"
of its jurisdiction, it appears that if there is any arena within which defendant agencies might be
expected to exercise their discretion and expertise, it should be in the choice and implementation
	~	See also Burka v. U.S. Dept. of Health and Human Services, 87 F.3d 508, 517
(D.C.Cir. 1996) ("The decision to limit or deny discovery by means of a Rule 26 protective order
rests on a balancing of various factors: the requester's need for the information from this
particular source, its relevance to the litigation at hand, the burden of producing the sought-after
material; and the harm which disclosure would cause to the party seeking to protect the
information").
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<< COB00024 >>
of an accounting method. Permitting the agencies to formulatc their own methodology without
subjecting every nuance of their decision-making process to inspection and challenge is
ultimately in the interest of the plaintiff class, insofar as it should expedite the ultimate resolution
in this case. The natural corollary of granting agencies some deference is, however, the required
expectation that an administrative record will be created in accordance with traditional APA
standards.
	Partially shielding defendants from discovery relating to their decision-making process
does not, however, immunize that process from review. If, after a record is proffered (or if no
record is proffered after a reasonable amount of time as determined by the Court), plaintiffs can
make a showing that it is insufficient, either on its face, or because it excludes relevant
documents, discovery relating to those infirmities may be permitted. See ~IFAC, 143
F.Supp.2d at II (citations omitted). Plaintiffs may, of course, challenge the method chosen by
defendants by cross-examining defendants' witnesses and/or by offering their own statistical
expert. If, after the record is proffered, plaintiffs can make a prima facie showing that the
methods or techniques defendants have chosen are unnecessarily flawed, the Special Master will
entertain a request for discovery regarding defendants' decision process. Such discovery may be
consistent with the exception to record review under the APA in cases of "bad faith and improper
action." Id. at 12.
(3)	Statutes of Limitations and Scope of Plaintiff Class.
	These issues have already been identified by the District Court and conceded by both
parties as legitimate areas of inquiry in preparation for the Phase II trial, see Cobell v. Babbitt, 91
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<< COB00025 >>
F.Supp.2d at 32, n.22; Defendants' Opposition at 3; Plaintiffs' Brief at 6, no further explication is
needcd.
(4)	Compliance with Extant Court Orders and Delay.
	Plaintiffs argue that discovery may be necessary to monitor defendants' compliance with
those orders already issued and also to assign responsibility for past misconduct during the course
of this litigation. They also contend that discovery concerning continuing delays by defendants
must be permitted. Plaintiffs' Brief at 5; Plaintiffs' Opposition at 4-7 and notes 2 and 3.
Defendants "agree that discovery is appropriate on matters relating to compliance with Court
Orders," Defendants' Opposition at 3, yet oppose discovery aimed at investigating unreasonable
delay. Id.at II.
	Defendant's opposition to plaintiffs inquiry into unreasonable delay is not sustainable as
this issue is squarely subsumed within an extant order which defendant concedes is proper —
specifically, the District Court's December 1999 Order requiring defendants to "promptly come
into compliance" (emphasis added) with their trust obligations by adopting "written policies and
procedures." Cobell, 91 F.Supp.2d at 40. Beyond this, the Court of Appeals has expressly
admonished the District Court to "ensure that its instructions are followed" and stated that
detection of actions by the Defendants which would "delay rather than accelerate" an accounting
fits "within the court's jurisdiction to monitor the Department's remedying of the delay." £gk~jl
240 F.3d at 1110.
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<< COB00026 >>
	There can thus be no question that both discovery aimed at monitoring compliance with all
outstanding court orders as well as discovery relevant to a determination of "undue delay" are
properly within plaintiffs' reach.
	C
DATE:	Alan L. Balaran
	SPECIAL MASTER
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