The U.S. Supreme Court heard oral arguments on Tuesday in a tribal self-determination case that one justice called a "competition between two bureaucracies."

During a one-hour hearing, members of the top court struggled with the question at the core of the case. The justices wondered whether federal agency contracts with tribal governments should be treated differently than other contracts.

If they aren't any different, then tribes are owed full support costs for administering federal programs. Tribal leaders say they are being shortchanged millions for carrying out health, social service and other programs.

But if the two types of contracts are different, then the federal government has a right to withhold money from tribes. Going by the questions posed to both sides of the dispute, the justices appeared divided on this issue.

The side leaning towards the tribes was led by Justice Stephen G. Breyer. He questioned why the government couldn't fulfill its obligations under the landmark Indian Self-Determination and Education Assistance Act of 1975, which calls for the Department of Health and Human Services to enter into contracts with tribes to manage hospitals, clinics and other health care programs.

"People who enter into contracts need certainty," he said.

The side leaning towards the government was led by Justice Antonin Scalia. Early in the hearing, he called the concept of self-determination contracts "strange."

"The [HHS] secretary has to give the tribes the authority to take over these federal functions," he said, emphasizing the word "give." "It seems to me a strange way to run a railroad."

Lloyd Miller, an attorney for the Cherokee Nation and the Duck Valley Shoshone-Paiute Tribe of Nevada, told the justices they should view the tribal agreements under standard contracting law. He said tribes are being forced to reduce critical on-the-ground services because the Indian Health Service, an agency of HHS, is not paying 100 percent of the contracts.

"No contractor would take that risk in dealing with the government," he said.

Sri Srinivasan, a Department of Justice attorney, argued that IHS is within its right to withhold funding in order to pay for "administrative" functions. He said the agency only takes 2 percent of the amount set aside for self-determination contracts for its own use.

"Funds for core agency functions don't have to be turned over to the contracting tribes," he said.

The outcome of the case largely rests on the interpretation of amendments to the 1975 law that were passed in subsequent appropriations acts. The amendments direct IHS to pay tribes the amount it would take to operate the programs plus support costs.

However, the language includes the phrase "subject to the availability of appropriations." It further states that IHS cannot take funds from one tribal contract to pay for another tribal contract.

In addition to Breyer, Justices David Souter and Sandra Day O'Connor appeared to fall on the pro-tribal side of the case. Scalia would normally have the support of Chief justice William Rehnquist, who did not attend the arguments yesterday due to a recent surgery, and Justice Clarence Thomas, who didn't ask any questions, as is his normal practice.

That leaves the votes of Justices John Paul Stevens, Ruth Bader Ginsburg and Anthony Kennedy open to debate. Their questions yesterday did not appear to support one side or the other.

But even within the divided camps, there appeared to be room for movement. Both sides questioned the government's interpretation of the appropriations amendments when Srinivasan said they allow IHS to use self-determination money for agency costs.

"If anybody is going to get squeezed, it's the agency itself," Scalia observed. "This is a competition between two bureaucracies."

Two lower courts have come to different conclusions on the matter. In July 2003, the Federal Circuit Court of Appeals applied normal contracting law and ruled that IHS couldn't withhold money from the tribes because it was "legally available" at the time it was appropriated by Congress.

Breyer and Souter noted that under this standard, the tribes should win the case. "I don't see why contracting principles don't trump" the government, Souter said.

But in November 2002, the 10th Circuit Court of Appeals said the IHS can choose to reprogram its lump-sum appropriation due to the "availability of appropriations" phrase. Ginsburg said this provision ensures that money for one tribe isn't taken by another.

"Do the ones who come to court get paid in full ... even if the others don't get their fair share?" she asked. "Does it just depend on first-to-come-to-court, first served?"

The Supreme Court's decision is likely to have an effect on other pending disputes. Miller's law firm is representing other tribes whose cases have been put on hold until the issue is resolved.

Separately, tribes have asked Congress to clarify the 1975 law yet again to ensure that they receive full support costs. The Senate Indian Affairs Committee held a hearing on the Tribal Contract Support Cost Technical Amendments bill in April.

Lower Court Decisions:
Fed Circuit: Thompson v. Cherokee Nation (July 3, 2003) | 10th Circuit: Cherokee Nation v. Thompson (November 26, 2002) |

Relevant Documents:
Docket Sheet No. 03-853: Thompson v. Cherokee Nation | Docket Sheet No. 02-1472: Cherokee Nation v. Thompson | Department of Justice Petition No. 03-853 | Department of Justice Supplemental Brief No. 02-1472

Related Decisions:
9th Circuit: Shoshone-Bannock v. Thompson (October 16, 2001) | 9th Circuit: Navajo Nation v. HHS, No. 99-16129 (April 8, 2003)

Relevant Links:
Contract Support Cost Litigation - http://www.cscclass.net
Contract Support Costs, NCAI - http://www.ncai.org/main/pages/issues/
governance/contract_support.asp
NARF-NCAI Tribal Supreme Court Project - http://doc.narf.org/sc/index.html