Shawnee Tribe Wins Injunction Against Treasury Over Failure to Distribute CARES Act Funds

On Tuesday, the D.C. Circuit granted a preliminary injunction for the Shawnee Tribe in Oklahoma freezing $12 million in COVID-19 funds allocated for distribution for tribes experiencing unforeseen pandemic expenses by the Secretary of the Treasury, Steve Mnuchin. The Tribe alleged it received only $100,000 in funds, despite having $6,650,000 in expenses from the COVID-19 pandemic due to the Secretary’s faulty methodology used to determine which tribes received what reserved portions of CARES Act funding. 

The plaintiff asserted that the Secretary chose to distribute the $8 billion in funds from the CARES Act reserved for tribes using a formula where 60% percent of the funds were allocated based directly on tribal population and 40% was based on expenditure data. The court explained that the CARES Act did not mandate such a fund expenditure formula, but did require the Secretary to take into account every tribe’s expenses that were directly related to the COVID-19 pandemic when choosing how to allocate funds. 

The Shawnee Tribe sought not challenge to the fund allocation formula itself, but rather how the defendant determined tribe population. The Tribe proffered that rather than gather the exact present population of each tribe from said tribe, the Secretary used inaccurate extrapolated 2003 census data. The plaintiff claimed that the Secretary estimated a tribal population using the land area of the tribe as recognized by the 2003 data and the census responses of people within said area that identified as “American Indian or Alaska Native.” This purportedly inaccurate way of determining tribal population, explained the associated opinion, resulted in the plaintiff receiving only $100,000 in CARES Act funds —the minimum allowed for a tribe— as the defendant’s formula recognized the Shawnee Tribe as having a population of zero despite the Tribe’s undisputed actual population of over 3,000. 

The District Court for the District of Columbia initially denied the Shawnee Tribe its requested injunction to receive pandemic relief funds in the amount of $12,000,000 versus $100,000. The court ruled that the CARES Act gave the Secretary complete discretion for how the funds were distributed to the tribes, thus making fund allocation decisions immune to judicial review under the Administrative Procedures Act (APA). The district court focused primarily on the fact that the Secretary received the $8,000,000,000 in a lump sum, writing that “where Congress merely appropriates lump-sum amounts without statutorily restricting what can be done with those funds, a clear inference arises that it does not intend to impose legally binding restrictions.”

The appellate panel disagreed with the lower court, holding that the mere fact that the Secretary received the funds in a lump sum does not automatically create a situation where how the funds are to be delegated is reserved entirely to the discretion of the agency, the standard necessary to make an agency’s delegation of authority as it concerns fund allocation immune to judicial review. The appeals court further explained that the lump sum of funds must also come with little to no boundaries on how the funds are to be used, outside of only using the funds within a certain appropriation account for a generalized purpose. The Secretary must be “allowed flexibility to shift funds within a particular appropriation account so that the agency can make necessary adjustments for unforeseen developments and changing requirements.”

However, the opinion explained, this is not the case here. The CARES Act mandated that the Secretary use all the funds reserved for tribes, only distribute the funds for expenses related to the “public health emergency” caused by the COVID-19 pandemic, and pay out all allocated funds to each Tribe within 30 days of the effective date of the CARES Act. As such, the court ruled that “Congress has ‘circumscribe[d] agency discretion to allocate resources by putting restrictions in the operative statute,’” thus making the Secretary’s allocation formula subject to court review. 

The appellate court stopped short of reviewing the merits of the fund distribution methodology, explaining that the matter was yet to be fully briefed at the district court level. As such, the matter was to be remanded to the lower court for review on the merits. The district court was also instructed to issue an immediate preliminary injunction preventing the Tribe’s sought after $12,000,000 in CARES Act funds from being distributed elsewhere, pending examination of who is entitled to said funds. 

In a statement provided to Law Street, Chief Ben Barnes of the Shawnee Tribe said “The favorable ruling by the D.C. Circuit means our case is back on an active track. Our arguments were persuasive, convincing the court the U.S. Treasury Department’s arbitrary actions to use false data to determine how much CARES Act relief funding we should receive are reviewable by the courts. While other tribes received millions, the U.S. Treasury Department flagrantly shortchanged the Shawnee Tribe from its fair share of the CARES Act coronavirus relief funds, causing hardship in our ability to fully care for our tribal citizens sadly affected by this deadly virus. While we are pleased with this win, we continue to incur costs and must advance our case through the court system to achieve a quick and equitable resolution to this matter. We will continue to press our case and will tenaciously advance it for the well-being of our tribal citizens who, like so many, have greatly suffered both financially and physically this past year.”

The plaintiff is represented by Quarles & Brady