Salazar v. Ramah Navajo Chapter – Oral Argument – April 18, 2012

Media for Salazar v. Ramah Navajo Chapter

Audio Transcription for Opinion Announcement – June 18, 2012 in Salazar v. Ramah Navajo Chapter

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John G. Roberts, Jr.:

We’ll hear argument this morning in Case 11-551, Salazar, Secretary of the Interior v. Ramah Navajo Chapter.

Mr. Freeman.

Mark R. Freeman:

Mr. Chief Justice, and may it please the Court:

The funding dispute in the — in this case is the result of two distinctive features of the ISDA’s statutory scheme.

On the one hand, Congress has required the Secretary of the Interior to accept every self-determination contract proposed by an Indian tribe, provided that the contract meets the requirements of the Act, without regard to the total number of contracts into which the Secretary must enter.

Now, on the other hand, in every fiscal year since 1994, Congress has enacted an explicit statutory cap on the amount of money that the Secretary may use to pay contract support costs under the ISDA and under those contracts.

Now, we think under the circumstances, Congress intended the Secretary to resolve these — the relationship between these provisions in exactly the way that the Secretary has.

Sonia Sotomayor:

Excuse me, but could the Secretary have done anything else?

Mark R. Freeman:

I’m sorry.

I couldn’t hear Your Honor.

Sonia Sotomayor:

Could the Secretary have done anything else?

There’s an allegation that the Secretary in fact pays some contractors more than their pro rata share, that it pays some nothing–

Mark R. Freeman:

Right.

Sonia Sotomayor:

–so that it’s in effect acting — I don’t want to use the word “arbitrarily” — but acting in whatever its best interest is.

So what protects the contracting party from that — from that conduct, assuming it were to be correct?

Mark R. Freeman:

Yes, Your Honor.

Well, the Secretary has promulgated a formal nationwide policy.

Sonia Sotomayor:

Says it has a policy.

Mark R. Freeman:

Yes, and–

Sonia Sotomayor:

The allegation is, is that it’s not following it, that it’s choosing to pay people some more than others.

Mark R. Freeman:

–Right.

And let me address that.

The allegation is, I think, at page 9 to 10 of Respondents’ brief.

Those allegations are, as a factual matter, false.

For example, they’ve given a couple of examples where 0 percent contract support costs were paid.

One of those examples is a contract where it had been entered into in that particular year.

New contracts are paid under a different appropriation.

Another example is they give a case of a tribe that was paid 352 percent of its contract support costs.

And let me explain, because I think it’s important to understand how–

Ruth Bader Ginsburg:

Before you do that–

Mark R. Freeman:

–Yes.

Ruth Bader Ginsburg:

–It was my understanding that that system, that has been described as arbitrary, was not the one that was applicable to the years in question.

Mark R. Freeman:

That’s right.

At — at the time of the district court’s ruling in this case, from 1994 to about 2006, the Secretary followed a uniform pro rata distribution methodology according to the needs of each of the individual tribes.

Now, that’s what we thought the tribes wanted.

We thought that was the fairest way to do it.

Anthony M. Kennedy:

And all within the — all within the dollar amount that was specified by the Congress in the “not to exceed” language.

Mark R. Freeman:

That’s exactly right, Your Honor.

Yes.

So each tribe has an amount of need.

This is the amount that is estimated.

It’s a negotiated figure between the Secretary and each tribe.

And it is undisputed that the amounts that Congress has been — has appropriated have never been enough to pay 100 percent of each of those figures for each member of the Respondent class.

Antonin Scalia:

Didn’t we have similar language in Cherokee Nation?

Didn’t we say that that language in Cherokee Nation, which was in the general appropriations statute although not on each contract, didn’t mean the Secretary could refuse to pay?

Mark R. Freeman:

No, Your Honor.

We did not have similar language in Cherokee, if you mean the Appropriations Act.

It was under the same–

Antonin Scalia:

No, I don’t mean the Appropriations Act.

I mean — I mean the general statute that governed this program.

Mark R. Freeman:

–That’s right.

And maybe it would be helpful if I could–

Antonin Scalia:

So why does it mean one thing there and mean something else when — in the Appropriations Act?

Mark R. Freeman:

–Well — I may not be understanding Your Honor’s question, but I — I think it might be helpful if I explain what was at issue in Cherokee.

In Cherokee, the government was not in this Court making Appropriations Clause arguments.

We were here making a very different argument.

It was undisputed in Cherokee that Congress had appropriated enough money for the unobligated available funds, lawfully available funds, for the Secretary to pay all of the contracts that were at issue.

Our argument — and to be sure, we thought we were right — our argument was that Congress had in other provisions of the Act allowed us to set aside a certain amount of money that, albeit lawfully available to pay the contracts, we thought we could use to fund the agency’s inherent Federal operations.

And the Court said: No, no, no.

These are contracts.

Mark R. Freeman:

The money was lawfully available for you to pay, and there was no statutory restriction against you paying it, so you had to pay it.

And this case involves the circumstance that–

Sonia Sotomayor:

Well, how — what was our reference and acceptance of the Ferris doctrine?

And the Ferris doctrine was almost identical to this situation, where Congress allotted a certain amount to the building of a particular dam, and the same — we applied the Ferris principle and said even though they gave it to one type of contract, the dam, they were paying 1 percent less than others.

Mark R. Freeman:

–No — no, Your Honor.

Sonia Sotomayor:

Where they had an allotment adequate enough to cover that individual.

Mark R. Freeman:

No.

I think that’s not quite an accurate characterization of Ferris.

And it’s important to understand what Ferris–

Sonia Sotomayor:

I know what the Federal Circuit said.

I don’t think the Federal Circuit’s right.

If you read Ferris, there was an appropriation for the dam.

Mark R. Freeman:

–Ferris was an appropriation for — I think it was 40-some thousand dollars for improvements to the Delaware River.

And the government, the Army Corps of Engineers, let out a contract for $37,000 to dredge the river.

Then after the contract had been let out — and this is critical.

If you stop the movie at the time the contract was issued, there was sufficient funds to pay that contract.

They were lawfully available.

We obligated them to the — to the contractor.

And then what happened in Ferris was, after that lawful binding agreement was entered, agency officials decided in their discretion that they’d prefer not to spend the money on that, and they instead built a wharf or something.

And what the Court said in Ferris — and this is — we’re not — we have no quarrel with this principle — is that when the funds are lawfully available and you obligate them to a contractor without some contingency, then you can’t just decide to spend it on something else.

That’s a breach.

And it’s not a defense to the breach that at the end of the — that at the end, once you’ve breached the contract, there isn’t enough money left in the appropriation to go back and pay them what you should have.

That’s different from this case, that there is not enough lawfully available money to pay every–

Antonin Scalia:

No, but — but there wasn’t in Ferris either.

I mean, that was the problem.

If the appropriations had been enough to cover that plus the later expenditures, there would have been no problem.

Mark R. Freeman:

–Your Honor, I think Ferris is correctly understood — particularly given this Court’s subsequent decisions in Sutton, in Bradley, Leiter, and other cases, Ferris is correctly understood as saying — and this is the proposition, incidentally, for which the Court’s cited Ferris in Cherokee.

Ferris is understood as saying if you’ve got a binding obligation in which you promised to pay money that is lawfully available, Congress gave it to you, then if you, agency officials, do something in your executive discretion–

Antonin Scalia:

Available subject to appropriations.

I mean, it was subject to appropriations.

Mark R. Freeman:

–Well, in Ferris, there were — in fact, the contract was not made subject to appropriations.

And one of the things the Federal Circuit pointed out was that the

“subject to the availability of appropriations. “

language that is now ubiquitous in government contracts was developed in part to make sure that the Ferris situation didn’t later arise.

But I want to underscore, if we know one thing in this case, we know that Congress intended for the Secretary not to pay any more than the amounts in the statutory caps.

Elena Kagan:

Mr. Freeman, could I try a hypothetical on you?

And it’s — it really is going to this question of what Ferris means.

So suppose that there’s a government program, and it’s to purchase airplanes.

And it’s — the authorization language says this is subject to appropriations, in the same way that this language does.

And the government, under this program, enters into 10 contracts of a million dollars each to buy 10 airplanes.

But then it turns out that Congress appropriates only $9 million, not $10 million.

So my question is: Now there are 10 contractors and — but there’s a shortfall of a million dollars–

Mark R. Freeman:

Right.

Elena Kagan:

–do those contractors have contractual rights under Ferris?

Mark R. Freeman:

I — Your Honor, it’s going to depend on a couple of things.

And let me — let me explain.

I think, because by hypothesis in your hypothetical we’re entering into the contracts in advance of appropriations, there is no right to be paid until the appropriations are made.

Elena Kagan:

Yes.

So the appropriation has been made.

It’s a $9 million appropriation.

Mark R. Freeman:

Right.

And in that circumstance, the agency cannot pay more than $9 million, and there is no binding obligation, contractual obligation, on the government to pay more.

Let me add something, though, in response–

Elena Kagan:

So — so either one of these airplane manufacturers is going to not have what he contracted for, or all of them are not going to have what they contracted for, because everybody is going to — their contract is going to be sliced.

Mark R. Freeman:

–And, Your Honor, the reason why this is not a problem in real life is that there are other provisions in your ordinary procurement contracts, under the ordinary kind of contracts that this case is not, that take care of that.

And the principal one is–

Elena Kagan:

My understanding, Mr. Freeman, is that that is what Ferris said, was that Ferris said in that situation where it turns out that there’s a shortfall but where there are contractual commitments, that — that the government is bound to live up to those contractual commitments.

And if there’s a shortfall, then it comes out of the Judgment Fund.

Mark R. Freeman:

–No.

Your Honor, it — there are a couple of things there.

Mark R. Freeman:

But let me first explain why as a practical matter that doesn’t happen in circumstances that are — are not like this scheme where we’re required to enter into every contract.

In your ordinary government procurement scheme, there are termination for convenience provisions.

And, in fact, what happens in the circumstances in which Your Honor posits is the government terminates for convenience enough of the contracts to make sure that we have the money to pay.

And if we didn’t do that, it would be a violation of the Anti-Deficiency Act.

And this Court has said many times–

Sonia Sotomayor:

So do the tribes have the right to stop providing the services–

Mark R. Freeman:

–Yes.

Sonia Sotomayor:

–that they’ve contracted to?

Mark R. Freeman:

Yes.

Sonia Sotomayor:

How do they know that until they know what they’re getting?

Mark R. Freeman:

Well–

Sonia Sotomayor:

Meaning they don’t know what they’re getting.

Mark R. Freeman:

–Well, they do know.

Sonia Sotomayor:

They signed a contract that says you’re going to pay them for their services to their members and for their administrative costs.

They incur that cost, and then at the end of the year, the government now says to them you’ve honored your part, but we’re not going to honor ours.

Mark R. Freeman:

No — no, Your Honor.

That’s — that’s not correct, and let me explain why.

First, every contract that the — every member of the Respondent class signed in this case says that the contractor’s obligation to perform the services that are at issue is subject to the availability of appropriated funds.

That’s Section (1)(c)(iii) of the model agreement that is read into every ISDA contract.

They further have the availability under Section (1)(b)(v) of that model agreement to stop at any point if they are worried that there’s not going to be enough money and seek assurances from the Secretary that there will be.

Now, as to whether they know and when they know how much money they are going to get, that was the point of the 2006 distribution policy that the Secretary adopted.

Under the pro-rata system that we used for the first many years, the tribes said, look, we don’t know how pro-rata is going to work out.

So, in consultation with the tribes, and, indeed, with the aid of several of the counsel for the Respondent class, we drafted a policy that–

Sonia Sotomayor:

What does the system do to the 50-odd contracts that Arctic Slope, in its amici brief, points to that are similar to these?

Does this now mean that moving forward, that every government contractor who has a “subject to appropriations” language takes the risk that at some point in the middle of the contract, the government is going to dishonor its obligation and pay it less than it said it would?

Mark R. Freeman:

–No.

No, Your Honor.

And this is my–

Sonia Sotomayor:

So how do — how do we differentiate those 50 other contracts?

Mark R. Freeman:

–Well, I think they were citing a number of different statutes in which the statutes provide that funding is subject to the availability of appropriations.

Mark R. Freeman:

Now, it’s important to underscore, that’s why I started with this point, I don’t believe in any of those statutory schemes is the government obligated to enter into every contract that comes in the door.

And–

Elena Kagan:

Well, but that’s partly why I asked you my hypothetical, Mr. Freeman, because I sort of wanted to see whether you would distinguish the hypothetical on that basis–

Mark R. Freeman:

–Right.

Elena Kagan:

–but you didn’t.

You said no, it doesn’t really matter.

Even if the government is not obligated to enter into contracts, if the government has entered into too many, too bad; we can’t make those additional appropriations.

Mark R. Freeman:

And, Your Honor, it is — the unique features of this statutory scheme are absolutely important, but I want to — I took Your Honor’s question to be under the general appropriations principles that we are describing, what would the result be?

And I think I’m right, but I should also add, as I said before, there are very strict fiscal controls in 31 U.S.C. 1501, et sequitur, that make clear and prevent the circumstance that Your Honor describes.

Stephen G. Breyer:

I’m sorry, I’m not clear on what the hypothetical is.

I thought her hypothetical — Justice Kagan’s — was a situation where the statute says, Mr. Secretary, you can spend no money beyond what is appropriated.

Mark R. Freeman:

Right.

Stephen G. Breyer:

But the contract doesn’t mention it.

That’s Ferris.

I thought that the — the real world is, in contracting, you typically have both a statute that says don’t pay more than is appropriated–

Mark R. Freeman:

Right.

Stephen G. Breyer:

–and in the contract it says, subject to appropriation, putting the contracting party on notice.

Mark R. Freeman:

That’s right.

And — and–

Stephen G. Breyer:

So which were you answering?

Mark R. Freeman:

–I — with respect to Justice Kagan, I believe we had a colloquy in which I said that because in her hypothetical we were entering into the contract in advance of appropriations, they would have to be made express — the contracts themselves would have to be subject to the availability of appropriations in the contracts.

Stephen G. Breyer:

The words in the contract are “subject to appropriations”.

Mark R. Freeman:

Yes.

And without that, it would be a violation of the Antideficiency Act–

Stephen G. Breyer:

Yes.

Mark R. Freeman:

–yes.

Stephen G. Breyer:

Okay.

So in that world — now we get to the question — in that world, what happens when 15 people each enter into such a contract for $100,000 each, and the appropriation turns out to be too small to pay all of them, but big enough to pay some?

Mark R. Freeman:

And, Your Honor, what I was trying to answer is that, in your ordinary contractual scheme, the government solves that problem in a very straightforward way.

We terminate for convenience the contracts — enough of those contracts to ensure that we have no obligations beyond the available appropriations.

Mark R. Freeman:

Now, we can’t do that here, which is why this is ultimately a question of congressional intent.

Sonia Sotomayor:

So why don’t we let Congress fix it?

Because there are so many ways that Congress could fix this problem directly.

By doing a line item allocation, it could take away the obligation to enter into these contracts and fully fund.

It could be much more direct–

Mark R. Freeman:

Your–

Sonia Sotomayor:

–than it’s being, given the interpretation that you’re advancing.

Mark R. Freeman:

–Your Honor, I think it’s important to understand what — and maybe it would help if I took a minute to explain this — what Congress was trying to do in this statutory scheme.

Sonia Sotomayor:

It was trying — it was trying to tell the tribes, we are honoring our obligation by paying you the costs, but we are really not going to do it because we are going to let the government give you less?

Mark R. Freeman:

No.

Look, Congress could–

Sonia Sotomayor:

I have to assume Congress intends what it says.

It intends to obligate you to enter into contracts that — that give — make you commit to paying their costs, correct?

Mark R. Freeman:

–Not with — yes.

But 450j-1(b) says, notwithstanding any provision of this Act, all funding under this Act is subject to the availability of appropriations.

And let me explain why Congress would have wanted to enact this statute that has some unusual features.

Congress, of course, could have said, we want to give every tribe the opportunity to enter — to provide services in its own name to its own people, but we are going to do this on a regular contract basis, meaning we’ll just give us — some to the Secretary.

The Secretary signs contracts as they come in until he doesn’t have any money left.

And then any tribe after that who asks for a — for a contract, the Secretary says no, we don’t have the money to do it.

But Congress chose a — a different approach.

Congress wanted, as a matter of self-determination, to require the Secretary to give every tribe who wants the ability to do this the opportunity to do it.

But, if it didn’t then say, all funding is subject to the availability of appropriations, the result would be that the government would be exposed to a liability that Congress could not estimate, because the ability of these tribes to pay for overhead costs and whatever varies tremendously from tribe–

Ruth Bader Ginsburg:

To what extent do you rely on — you haven’t mentioned it up till now, but Congress, in these appropriations, said “not in excess of”.

Mark R. Freeman:

–Yes.

Ruth Bader Ginsburg:

It wasn’t just a general “subject to appropriations”.

It was a specific amount, the Secretary shall not pay in excess of a certain dollar amount for these costs.

Anthony M. Kennedy:

I had exactly the same question.

The “not to exceed” language, which I think is the word, not to exceed, hasn’t been mentioned by you yet because — maybe you haven’t had time.

Mark R. Freeman:

Right.

[Laughter]

Mark R. Freeman:

That would be it.

Anthony M. Kennedy:

But — but I thought that was what Judge Dyk said–

Mark R. Freeman:

Yes.

Anthony M. Kennedy:

–was the critical — the difference between this and even the Cherokee case.

Mark R. Freeman:

Right.

Anthony M. Kennedy:

And so my question is — is the same as Justice Ginsburg’s.

Isn’t a principal part of your argument that this contract said not to exceed, and then the sums differ from year to year, but let’s say $95 million?

Mark R. Freeman:

That’s exactly right, Your Honor.

I mean — and what I — what I tried to answer to a question earlier, it is absolutely clear what Congress was trying to do here.

Congress said not to exceed a specific sum from year to year–

Anthony M. Kennedy:

When the Congressional Budget Office, or whatever agency it is that figures out whether there is a deficit and, if so, of how much, do they look at “not to exceed”, and do they take that amount seriously?

Or–

Mark R. Freeman:

–Oh, oh, absolutely, Your Honor.

And–

Anthony M. Kennedy:

–But the — but the position of the Respondents is that it makes no difference.

Mark R. Freeman:

–No difference at all.

Anthony M. Kennedy:

Congress is saying nothing at all.

Mark R. Freeman:

Yes, yes.

Ruth Bader Ginsburg:

It really–

John G. Roberts, Jr.:

So the consequence on the ground is that, if I’m a tribe and I want this money, and I figure out that this is going to cost me $80,000–

Mark R. Freeman:

Yes.

John G. Roberts, Jr.:

–I sign a contract and say, this is going to cost me $100,000, because I know there isn’t going to be $100,000; there is only going to be $80,000, and that’s what I need, right?

Mark R. Freeman:

Well, in fact, it can’t work that way, Your Honor, because the amounts are limited by statute to the reasonable and allowable costs that are not duplicative of the principal program funds, the funds to run the program–

John G. Roberts, Jr.:

Well, but it’s — well, if 80,000 is reasonable, the only way to get that is to ask for 100?

Mark R. Freeman:

–Right.

And if a tribe thinks that we haven’t put in to the — we haven’t offered them enough money for their contract support costs, they are allowed to decline the offer that we make.

And they can — unusually, for government contractors, they can file a separate lawsuit before entering into the contract to litigate whether the terms are sufficient.

Ruth Bader Ginsburg:

–Mr. Freeman, where did these caps come from?

Did the agency initiate them?

Or, there is a chart — perhaps I don’t understand it correctly.

Ruth Bader Ginsburg:

It’s on page 210 of the joint appendix.

It does — it does seem to indicate that it was the BIA that proposed the cutbacks.

Mark R. Freeman:

The caps come from Congress, Your Honor.

Respondents have make — have made an argument at the end of their brief that the government should be liable here notwithstanding the caps because the BIA hasn’t requested sufficient funding from Congress — or, rather, the President hasn’t requested sufficient funding from Congress.

That argument, we think, is baseless for a number of reasons.

And just as a factual matter, the GAO has done some studies of this.

There are reports in the joint appendix explaining why BIA has not in every year asked for what turned out to be enough money.

And that’s because these — this funding is done on a prospective estimated basis.

And because we are required to take into — we are required to accept every contract that comes in the door, BIA may estimate and make its best available estimate, and OMB and the President may accept that if he chooses, but it still turn may turn out not to be enough.

Antonin Scalia:

That’s not really relevant here anyway, is it?

Mark R. Freeman:

No, it is not.

It is not relevant, Your Honor.

No.

That’s right.

Antonin Scalia:

What I don’t understand is why the language $900,000.

You mean the world changes if — if Congress, instead of just appropriating $900,000, authorizes the Secretary to expend not to exceed $900,000?

Why–

Mark R. Freeman:

I don’t think in that circumstance there would be any difference.

Here, the reason why it’s different is that this is ultimately a question of what Congress was trying to do.

There is no constitutional argument that Congress can’t enact these kind of caps, and we know from the “not to exceed” language that Congress was being as emphatic as it could.

Antonin Scalia:

–Well, I — I think $900,000 is pretty emphatic, if that’s all you appropriate.

Mark R. Freeman:

Right.

And just — it’s just this is the way, as an ordinary matter, that in appropriations Congress expresses an internal cap.

It said–

Elena Kagan:

But that runs you right into Ferris.

Then you’re saying that there’s no difference between the standard Ferris-type appropriation, which is just an amount of money, and this kind of appropriation, which is up to or not to exceed that amount of money.

Mark R. Freeman:

–Your Honor, Ferris we think is inapplicable just to this type of statutory scheme where we’re required to enter into the contracts, and there’s a limited sum available.

That’s Judge Dyk’s reasoning in the Federal Circuit, but let me put that aside for the moment and address Ferris directly.

As I said before, Ferris is about the circumstance in which there are enough available funds in the first instance to pay the contractual obligations.

Now, Ferris does not and cannot stand for the proposition that an executive officer looking at the amount Congress made available in the first instance can bind the Treasury to pay more than Congress has expressly stated he may bind it to.

Mark R. Freeman:

This Court has said many, many times–

Anthony M. Kennedy:

I take it the Respondents’ position is that the contracting officer says, now, this is going to go over the not-to-exceed amount, but not to worry, just sue us under the judgment — just sue us under the Judgment Act.

Mark R. Freeman:

–Right.

And there is no reason to think that Congress contemplated such a scheme, which would amount to essentially giving full contract support cost funding, but only for the tribes who have the resources and sophistication to sue, minus litigation costs.

That makes no sense at all.

When Congress says “not to exceed”, a certain amount of money may come out of the Treasury–

John G. Roberts, Jr.:

It makes sense if you’re looking at the reality of the budgeting process because in one case, that one line item appears on the Department of Interior budget; and in the other case, it appears somewhere else in the Judgment Fund budget.

And they can say it’s not our fault.

The Judgment Fund — the court made us do it–

Mark R. Freeman:

–Well, I don’t think so, Your Honor.

The Judgment Fund is not a new thing.

The Judgment Fund is available only to pay judgments validly entered against the United States.

Now, we don’t dispute that it’s available to pay breach of contract damages; but, of course, a breach of contract requires a violation of — a violation, a failure to perform a binding contractual promise.

Now, we think we’ve performed our promise here because our — our promise was to pay the sums that Congress made lawfully available.

And we think that, to the extent Respondents think we promised to pay more than Congress explicitly said could be available, the Secretary had no authority to enter into that promise.

Now–

Sonia Sotomayor:

But that’s true of every contract.

That’s where I’m getting stuck on what your theory is.

The Anti-Deficiency Act says you can’t spend more than you’re given.

Mark R. Freeman:

–Yes.

Sonia Sotomayor:

So every single contractor, under your logic, should know that when they sign a contract, the government can break it because if it doesn’t have enough funds, it can’t pay.

Mark R. Freeman:

And, Your Honor, that–

Sonia Sotomayor:

But — so there’s no real logic to your argument, other than to say we can’t — we’re — if the contract says “subject to appropriations”, let’s do away with Ferris, let’s do away with Cherokee Nation and–

Mark R. Freeman:

–No, no–

Sonia Sotomayor:

–it just means that we pay you what we can.

Mark R. Freeman:

–No.

That is emphatically not true.

As — as an initial matter, as I’ve tried to explain before, there are very strict requirements in the government’s contracting processes, such as the Federal Acquisition Regulation, that limit the ability of the government to make many promises it can’t keep, particularly with regard to funding.

Sonia Sotomayor:

But what you’re saying is you make two promises on the ISDA.

We’re going to pay you your support costs, your administrative costs, in full, and we’re going to retain the right to break that promise.

Sonia Sotomayor:

That’s really what you’re saying the ISDA says.

Mark R. Freeman:

No.

That’s not right, Your Honor.

And I — I’ll answer this, and then I’d like to reserve the balance of my time.

The ISDA says our promise is to pay you what Congress lets us pay you.

It’s not breaking our promise to limit it to appropriation; it is keeping our promise.

Sonia Sotomayor:

So you ignore all the language where it says we’re going to pay you X amount, all the law that says you have to be reimbursed — the tribes have to be reimbursed for all their costs; all of that is going to be ignored?

Mark R. Freeman:

Well, it’s not that it’s ignored, it’s that section 450j-1(b) says, notwithstanding any other provision of this Act, and we think that’s fairly clear.

John G. Roberts, Jr.:

–Thank you, counsel.

Mr. Phillips.

Carter G. Phillips:

Thank you, Mr. Chief Justice, and may it please the Court:

I guess I’d like to start on the Ferris doctrine because it seems to me that is the fundamental issue in this case.

And the principle of Ferris — and it’s interesting to me that counsel for the government never once makes any reference to the Comptroller General’s interpretation of the Ferris doctrine, which in the Redbook says, as plain as day, that in circumstances like this one, where the government has more contractors than it had — than one, and those contractors are subject to an appropriation, and it cannot exceed that appropriation — I think all of that language, frankly, is implied anyway — the contract–

Anthony M. Kennedy:

So you say — you say you don’t want us to mention “not to exceed” in our opinion–

Carter G. Phillips:

–Oh, no.

The–

Anthony M. Kennedy:

–other than to say that it’s irrelevant?

Carter G. Phillips:

–No.

“Not to exceed” has a very significant role to play, Justice Kennedy, because–

Anthony M. Kennedy:

Does the Redbook talk about “not to exceed” as being any different from general appropriations?

Carter G. Phillips:

–The place where “not to exceed”, I think, carries particular significance is that in the ordinary situation, we would be entitled to seek injunctive relief to take money from other sources within — within the budget and get an injunction.

And that’s very unique to the — to this context.

Ordinarily, government contractors cannot seek injunctive relief.

This “not to exceed” language–

Anthony M. Kennedy:

Does the Redbook–

Carter G. Phillips:

–deprives us of that.

Anthony M. Kennedy:

–Does the Redbook refer to “not to exceed” — the “not to exceed” language?

Carter G. Phillips:

I’m sorry, Justice Kennedy?

Anthony M. Kennedy:

Does the Redbook have — refer to the “not to exceed” language?

Carter G. Phillips:

The Redbook doesn’t — well, actually, the Redbook does say that all of these phrases are essentially the same, which is that they–

Stephen G. Breyer:

I saw — I read the Redbook.

I might have missed the part that you’re about to cite to, because I’d like you to tell me where in the Redbook it says that a contractor who has a contract that says “subject to appropriations” and is then dealing with the law of Congress which says the appropriation will not exceed X million is then entitled to be paid on a contract where he and like contracts do exceed X million.

Where does is say that in the Redbook?

Carter G. Phillips:

–The Redbook–

Stephen G. Breyer:

I couldn’t find it.

Carter G. Phillips:

–Well, the Redbook talks about subject to appropriations; it talks about–

Stephen G. Breyer:

I did read it.

I just would like to know what page you want me to read again.

I read the Chamber of Commerce brief.

The Chamber of Commerce brief says everybody knows the contractors are paid in this situation.

So I looked up the authorities that they cited.

Okay?

I read the Redbook.

I read my other case of Cherokee.

I read Ferris.

I read Sutton.

I can’t say I’m perfect at reading–

Carter G. Phillips:

–Okay.

Stephen G. Breyer:

–but I couldn’t find it.

Carter G. Phillips:

Justice Breyer–

Stephen G. Breyer:

So I would appreciate your referring me to those citations.

Carter G. Phillips:

–GAO Redbook 6-44–

Stephen G. Breyer:

Okay.

Carter G. Phillips:

–says–

Stephen G. Breyer:

I have it in front of me, by coincidence.

[Laughter]

Here it is.

Carter G. Phillips:

–This is in our brief at page–

Stephen G. Breyer:

No, no.

I have the Redbook 6-44.

John G. Roberts, Jr.:

What page, for those of us who don’t have it in front of us?

Carter G. Phillips:

–In my brief, it’s on page 31.

John G. Roberts, Jr.:

Thank you.

Stephen G. Breyer:

I’m not saying it isn’t there.

I just read through these pretty quickly.

I just need a little refresher.

Carter G. Phillips:

Yes.

If you look at — I’m sorry — 2 GAO — well, I think you can use either of these: 2 GAO Redbook 6-28 to — 29 talks–

Stephen G. Breyer:

Oh, I don’t have that.

Carter G. Phillips:

–talks about “for” followed by a purpose and an amount has the, quote, “same effect as” — quote —

“‘words like “not more than” or “not to exceed”. “

So, I mean, what they’re saying is that all of this–

Sonia Sotomayor:

Could you give me that cite again.

Carter G. Phillips:

–I’m sorry.

I apologize, Your Honor.

2 GAO Redbook 6-28 to — 29.

And I think the same–

Stephen G. Breyer:

No.

That isn’t quite my question.

My question was: I would like the authority for the proposition that when you have a set of contractors, and they read their contract, and it says $4 million, and then you discover that the amount of the contracts of the same kind in this category are more than $4 million, I want to know where in the Redbook it says that they get paid more than $4 million.

That’s all.

That’s fairly simple.

And if that’s — if that’s normal practice, it must be there’s a lot of authority for it.

So I just want to know what to read.

Carter G. Phillips:

–Well, here, 6-45 says, if a contract is but one activity under a larger appropriation, it is not reasonable to expect the contractor to know how much of that appropriation remains available.

Stephen G. Breyer:

But they aren’t talking about there where it says specifically in the contract “subject to appropriations”.

At least, I think they’re not.

Now, I would like you right now to tell me, no, you’re wrong; it does say that.

Carter G. Phillips:

Well, it says, if Congress appropriates a specific dollar amount for a particular contract–

Stephen G. Breyer:

They’re distinguishing Sutton from Ferris.

Carter G. Phillips:

–I’m sorry?

Stephen G. Breyer:

They’re trying to use that to distinguish Sutton from Ferris, and it’s filled with, well, we’re not sure about this because Sutton, which is Brandeis, which comes out the opposite way, did have a line appropriation, and I thought that just refers to the fact that because there’s a line appropriation the contractor is on notice.

Carter G. Phillips:

Right.

Exactly.

Stephen G. Breyer:

Exactly.

And when you do business with the government over a period of years, and it says subject to appropriation, not necessarily you but your lawyer, who is a good lawyer, should look up and see what the appropriation is or whether it was made.

I mean, that’s what I–

Carter G. Phillips:

Justice Breyer, as a matter of policy — you know, if Congress–

Stephen G. Breyer:

–No, no, not as a matter of policy.

I’m putting it as a question because that was my first reaction, and I expect you to say, no, Justice Breyer–

Carter G. Phillips:

–Well, clearly–

Stephen G. Breyer:

–you’re wrong, and that isn’t the practice, and here is what I read to show that isn’t the practice.

That’s all I’m asking.

Carter G. Phillips:

–Well, I guess I don’t understand exactly how to answer that question, Justice Breyer, because–

Stephen G. Breyer:

By showing me where in the law it says — and I don’t want to repeat the question for the third time, but it says–

Antonin Scalia:

I wish you would.

I’ve lost the question.

[Laughter]

Stephen G. Breyer:

–Well, here sometimes not everyone pays sufficient attention to these very clear questions.

[Laughter]

Carter G. Phillips:

–I’m doing my best, Justice Breyer.

Stephen G. Breyer:

Where — Look, hypothetical, four people, four identical contracts, the words appear, “subject to appropriation”.

Carter G. Phillips:

Right.

Stephen G. Breyer:

Each is for a million dollars.

Then you read the appropriation that was later made, and in that statute it says, “we hereby appropriate three million”, and — it is,

“the payments are not to exceed three million. “

Okay?

Something like that.

Carter G. Phillips:

Right.

Stephen G. Breyer:

All I want is the authority that says each of those four people can come in and get the $1 million, totaling four million.

Stephen G. Breyer:

I want the authority that says that.

Carter G. Phillips:

I mean, I would read Ferris.

Stephen G. Breyer:

No.

It did not say anything about it in the contract.

Carter G. Phillips:

Well, I mean, Ferris has a limitation.

The government has already told us that subject to appropriation is implicit in every — in every agreement anyway, so there’s nothing special about putting in the words “subject to appropriation”.

Stephen G. Breyer:

Oh, there certainly is.

Putting in the words gives the lawyer notice.

Carter G. Phillips:

Well, again, the only notice it gives is that there has to be enough money when you look at the appropriation to cover your contract.

Antonin Scalia:

Ferris did not say, as I recall, that you can’t expect the contractor to have notice that appropriations have been limited.

It said you can’t expect them to have notice as to how much of the expenditures under that appropriated act have been spent.

Isn’t that the only thing it required notice of?

Carter G. Phillips:

Right.

That’s–

Antonin Scalia:

I would think, if you sign a contract, you better be sure that there are appropriations for it.

Carter G. Phillips:

–Clearly.

And that — I mean, and, Justice Breyer, the Court’s opinion in Cherokee said that the primary purpose of the subject to availability clause is to deal with the situation where you enter into the agreement ahead of the fiscal year, and so everybody knows that if Congress, for whatever reason, decides not to appropriate any money, there is no deal, and nothing happens.

Anthony M. Kennedy:

So, in your view, if the Tribe comes to the government, and they say, look, we’ve been looking at what you’ve done with the other tribes, you’ve appropriated $95 million, and the appropriation says,

“not to exceed $95 million. “

but go ahead and make this contract with us, anyway, no one cares.

And you say, go ahead and make it.

Right?

Carter G. Phillips:

Well, I mean, it seems to me it’s the government’s problem to sort it out.

Anthony M. Kennedy:

That’s your position, isn’t it?

Carter G. Phillips:

Right.

But, again, put it in the context, Justice Kennedy, of the individual tribe.

Ruth Bader Ginsburg:

You can’t get it from Cherokee.

I mean, yes, there’s Ferris, and then Cherokee–

Carter G. Phillips:

Right.

Ruth Bader Ginsburg:

–is relying on Ferris; but, Cherokee is very careful to point out that there were funds to cover–

Carter G. Phillips:

No question about it, Justice Ginsburg.

I don’t think this case is controlled by Cherokee.

I do think Cherokee answers the question of how far can you carry the “subject to availability” language.

I don’t think it gets the government anywhere near home.

And then the question is, what do you do with the “not to exceed” language.

And I would suggest there is that, that’s no different, frankly, from Ferris or any other situation, because what the — Congress operates against the backdrop of Ferris, which is a 120-plus-year-old doctrine that has been allowed to stay in place by Congress for that entire time.

And as the Chamber of Commerce tells us, this is a rule that every contractor takes as an article of faith in dealing with the United States Government.

Antonin Scalia:

Well, am I correct that what the government is arguing is that the fact that this limitation was included in the particular contract makes it different from Ferris?

Carter G. Phillips:

Well, it’s hard to make that argument because the “not to exceed” language, at least, that comes out of the — that’s in the appropriations provision.

That’s not in the contract itself.

The contract itself simply says subject to appropriations.

Antonin Scalia:

Which Ferris did not.

Did the Ferris contract say that?

Carter G. Phillips:

It’s — Ferris doesn’t have the “subject to appropriation”, but the Ferris contract says the appropriation limit is X.

Stephen G. Breyer:

It does?

Where do you get — I couldn’t find the contract.

The language in Ferris is,

“a contractor who is one of several persons to be paid out of an appropriation is not chargeable with knowledge of its administration. “

True.

Now, Dyk says, in his opinion, that one difference from Ferris is they wrote the idea into the contract, saying you’re subject to appropriation to get — to make that lawyer chargeable with knowledge.

And the second thing in Ferris is that it was an individual who went off on his own in the administration and paid money that he shouldn’t have paid.

It should have been over here for the contract.

In this case, it is an instance where Congress itself required the money to be paid, as it was paid, and didn’t provide enough.

Okay.

So that’s where I am with Ferris, which is a big question mark.

And I guess you can talk about that, but all I wanted to know is what is well established in this field.

Carter G. Phillips:

Well–

Stephen G. Breyer:

I don’t want to write something that suddenly upsets what is well established.

Carter G. Phillips:

–Okay.

Well, I take this, then, straight from the Red Book again.

Carter G. Phillips:

“It is settled that contractors paid from a general appropriation are not barred from recovering for breach of contract, even though the appropriation is exhausted. “

And so even though — and there is nothing in — there’s no limitation–

Stephen G. Breyer:

–as it says in the contract, you are barred, you are barred from recovering if we don’t appropriate enough money.

Should it say that wouldn’t matter?

Is that right?

Carter G. Phillips:

–Well, it would say that if you don’t appropriate enough money for the specific contract, yes.

I think that’s clearly what Sutton holds.

Is that if — if Justice Scalia and I have an agreement, and the appropriation goes to $100 for our agreement, and the contract says $500, I’m out of luck for the extra $400.

Sonia Sotomayor:

Mr. Phillips, this is an unusual situation with the tribes because in the normal “not to exceed” appropriation by Congress, the government rightly says we have the power to not contract.

And in military contracts and others, we have a for convenience cancellation.

We have all sorts of things that protect us from the deficiency.

But this is a unique situation because the government, on the one hand, despite their protestations to the contrary, are forced to accept these contracts.

Carter G. Phillips:

Right.

Sonia Sotomayor:

And on the other hand, Congress is saying, don’t pay more on them.

We are telling you to accept more payment than we are going to give you.

Carter G. Phillips:

Right.

Sonia Sotomayor:

Should we create a special rule for this — why shouldn’t we create a special rule for this unique situation?

Carter G. Phillips:

Because, essentially, what you’re doing is putting the backs of this problem — putting the burden of this problem on the backs of innocent contractors who–

Antonin Scalia:

Well, is it–

Carter G. Phillips:

–Who entered into in good faith these agreements.

Antonin Scalia:

–Well, is it just a question of our creating a new rule; or, rather, is the proposition whether the tribes, when they entered into this, should have realized that because of the peculiarity of these contracts, that they had to be entered into, that the rule which otherwise would apply does not apply?

It ought to be a question of expectation of the tribe, should it not?

Carter G. Phillips:

Well, I would — I would suggest a couple things about that.

I mean, I think in general it’s reasonable to look for the — obviously, the intent of the parties and the expectations of the parties.

This case went off on summary judgment that we lost, I mean, even on a — so we didn’t have an opportunity for any analysis of this.

But the reality is, is that from the Tribe’s perspective, they recognize, because of Ferris, and because of the way the Comptroller General has interpreted Ferris, that they are under a duty to make sure that there is an appropriation that covers this contract, that the amount, purpose, time requirements are all satisfied with enough money to accomplish that.

And then, of course, we have the obligation to perform, which, of course, that’s the other half of the equation here.

And, Justice Sotomayor, that’s why I wouldn’t say–

Ruth Bader Ginsburg:

–But you don’t — you don’t have the obligation to perform.

I mean, right?

Ruth Bader Ginsburg:

In a term of the contract, that if there are lack of sufficient appropriations, performance by either party is excused.

Carter G. Phillips:

–Well, that — yes, Justice Ginsburg.

But the problem is, we don’t know the answer to that until after the year of performance is done, or at least months into the performance.

And sometimes, literally, after we’ve already performed.

Anthony M. Kennedy:

Suppose you did know.

Suppose the Tribe knew that the 95 million — let’s assume that that’s the not to exceed amount — had already been obligated.

Could the Tribe then go ahead and make the government — a contract with the government, and would the government have to make that contract, in your view?

Carter G. Phillips:

I mean, that is the Southern Ute case.

And I — and, certainly, you can make an argument to that.

The government has an argument on the other side.

Anthony M. Kennedy:

Is it your argument that the answer to that is yes?

Carter G. Phillips:

The argument is, it appears that Congress intended to require them to enter into that agreement.

You know, the idea of Congress requiring an official to enter into an agreement that violates a criminal statute is at least a difficult concept to sort of wrap your mind around.

Anthony M. Kennedy:

Isn’t this more specific language than the general language?

Doesn’t this specific language, not to exceed, supersede the general obligation to make the contract?

Otherwise, it’s meaningless.

The “not to exceed language” is meaningless.

Carter G. Phillips:

No, but–

Anthony M. Kennedy:

You say it’s meaningless.

Carter G. Phillips:

–No, Justice Kennedy.

I told you what the meaning of the “not to exceed” language is.

The BIA or anyone else at the Interior and say, give us money from another source in order to pay for our contract.

And we can’t use the injunctive relief that’s otherwise available to us for that purpose.

So that language has very significant importance in limiting what our options are–

Ruth Bader Ginsburg:

Mr. Phillips–

Carter G. Phillips:

–in a circumstance where we are not being paid enough under the — the agreement.

Ruth Bader Ginsburg:

–do I understand your position to be that, yes, the cap has meaning, because in order to exceed the cap, the tribe has to sue; so, any tribe that sues, for any tribe that sues, the cap is meaningless?

It’s only for the ones who are not sophisticated enough to sue.

They are just stuck with what Congress said.

So it seems to me that would be a very bizarre scheme to say that; that you have a cap, but the cap is meaningless if you bring a lawsuit.

Carter G. Phillips:

No.

I — I mean, I — it seems to me that we can’t — I mean, aside from bringing a lawsuit, I mean, we — we could go to the Secretary and say, we don’t have enough money to satisfy our contract, would you take money from some other source in order to accomplish that.

Because, in the ordinary course, that’s not uncommon to re — re-jigger the appropriation.

Antonin Scalia:

Do you think it protects these — these unsophisticated tribes who don’t know enough to sue by not allowing anybody to sue?

Carter G. Phillips:

Well, that — yes, there is–

Antonin Scalia:

Does that make their situation better somehow?

Carter G. Phillips:

–To be sure, that would not make our situation any better, but–

Ruth Bader Ginsburg:

My question is whether the cap was meaningless.

And I think your answer is, yes, for anyone who sues, the cap is meaningless.

Carter G. Phillips:

–No.

No.

It — I don’t — I don’t think it does that.

It — it — it places inherent limitations — I mean, it says specifically that the Secretary is not authorized to shift money around in order to take care of this particular problem in this particular year that otherwise would be available to us.

Anthony M. Kennedy:

You just go to the judgment–

Carter G. Phillips:

I’m sorry?

Anthony M. Kennedy:

–You just go to the judgment fund–

Carter G. Phillips:

Of course.

Then, we–

Anthony M. Kennedy:

–which makes it meaningless.

Carter G. Phillips:

–Well, ultimately, it means that the burden of it will not fall on the tribes.

It is — it does mean that.

But — and let’s be clear about this.

The judgment fund — this is not simply going to the judgment fund and asking for our contract support costs to be paid.

Our argument here is that there has been a breach of contract, and we are entitled to the damages for the breach of contract, whether those are reliance damages or restitutionary damages, whether we — whether we are supposed to get what we expected out of the deal or put back in the position we would have been in.

Elena Kagan:

Mr. Phillips, if you look at this situation, it seems pretty clear that Congress did want to do something, which was to limit the amount of money that was going to the tribes under these contracts.

Do you think that there is a way that Congress can do that–

Carter G. Phillips:

Oh, sure.

Elena Kagan:

–consistent with this scheme that’s set up by the statute?

How could Congress do that?

You know, if — if — if they can’t do it this way, how could they?

Carter G. Phillips:

Well, the easy way would be to impose specific limitations in — in every one of the contracts, which — which, frankly, if you read appropriations bills, which I hate to say I have occasionally done–

Elena Kagan:

When you say specific limitations, what would that look like?

Carter G. Phillips:

–It would look like — for the agreement between the United States and Ramah Navajo for — for contract support costs in this particular — for taking over the police department, the contract support costs shall not exceed $150,000, period.

That’s the total appropriation.

And if we look at our contract — and there is a specific number in the contract — and that contract says $174,000, then we know that we are out of luck for the $24,000.

We’ve been put on specific notice–

Samuel A. Alito, Jr.:

For any particular year, are they all entered into it at about the same time?

Carter G. Phillips:

–What’s that, Justice Alito?

Samuel A. Alito, Jr.:

For any particular fiscal year, are all of these contracts entered into by a particular date?

Carter G. Phillips:

Yeah, nothing is all that easy, obviously.

Some of them enter into it on a fiscal year basis.

Some of them enter into it on a — on a — on a calendar year basis.

And, frankly, the — part of the problem is when does the government get around to signing these agreements.

And, also, there are 12 regions.

I mean, part of the reason — I would like to spend a second talking about the comment that, you know, we have this fair and equitable scheme in place in which we are allocating moneys out, when the reality is, is that there is substantial evidence in the record, even though we have not had an opportunity to make a full record, that the — that the — that the Bureau makes mistakes in 40 percent of these contractual arrangements.

And I know my — my colleague is going to dispute that, but the truth is we’ve known that for years.

They just make mistakes, and people get impaired — their contract rights are impaired on that basis.

This is not some kind of an inequitable scheme that’s operating here.

There are 12 different regions operating in 12 different ways.

Some people get money, some people get 300 percent of theirs, some people get zero percent of theirs.

Sonia Sotomayor:

Mr. Phillips, how does Congress do this without upsetting the entire scheme?

Knowing that these contracts are not all signed on one day, that there are 12 regions, that the negotiations go over time, how could Congress achieve the scheme that the government wants now?

How would it write this contract?

Carter G. Phillips:

Right.

Well, the easy way would be to take away the requirement that the government has to enter into all of these contracts at the request of the tribe.

And — and — and that’s clearly available.

If they want to go down that path, they can do that in a heartbeat.

And then they have all of the discretion they want — they want to apply under these circumstances.

So, I mean, there’s — obviously, there is a bit of, as we said in the brief, schizophrenia.

And I have some misgivings about describing Congress that way, but there is some schizophrenia in how they approach this problem.

Antonin Scalia:

Do you have to solve it contract by contract?

Couldn’t there be a — a provision in the — in the law which — which says that, where appropriated funds are inadequate to cover the totality of — of — of costs under this statute, it will be apportioned as follows?

Carter G. Phillips:

Yes.

Congress could–

Antonin Scalia:

Or the Secretary will apportion it?

That’s all it would take.

You wouldn’t even have to do it contract by contract; right?

Carter G. Phillips:

–Right.

I — I mean, I think that would–

Antonin Scalia:

You would prefer contract by contract for your clients.

Carter G. Phillips:

–Well, I just think it’s been noted–

Antonin Scalia:

Oh, absolutely–

Carter G. Phillips:

–but, you know, I don’t disagree with that.

Look, and as we argued in our brief, there are three or four different ways that Congress can fix this problem going forward, but — and that’s — and that’s the message, I thought, from Justice Sotomayor, is why don’t we let Congress fix the problem and allow the background principles of Ferris, as interpreted by the Comptroller General, to apply in this case in order to resolve the contract dispute that’s properly, obviously, before the Court at this point.

I’m sorry, Mr. Chief Justice.

John G. Roberts, Jr.:

I think — I think this may have been asked, and I’m not sure of the — I understood the answer.

This is — is this on an ongoing, forward looking basis?

In other words, you enter into the contracts, and then you wait and see whether there are appropriations?

Carter G. Phillips:

Yes.

Typically, what happens is you enter into the agreement sometime just before the appropriation comes down.

It’s — it’s — it’s usually pretty close, because–

John G. Roberts, Jr.:

Well, so doesn’t it make — I mean, doesn’t the system that the government is operating under make a lot of sense?

Because let’s say the tribe says, look, we need a million dollars.

The Secretary agrees to it.

And then I assume the two of them get together and say, well, we’ll try to get the appropriation for it.

You know, you understand we may not get it, but this is how much you need, we’ll go back and get it.

If you get it, that’s great; if you don’t, well, then that’s–

Carter G. Phillips:

–And — and, Mr. Chief Justice, if they did that on a — on a tribe-by-tribe, contract-by-contract basis, I — I wouldn’t have any problem with that, because then you’re on notice.

But when they say to you, okay, fine, here’s — you know, this is — there is your contract support cost provision, there is a specific number in there, 1.3.78 dollars and 63 cents, that’s what you ought to get, and we get an appropriation that comes back in that says the government will — that, you know, we have appropriated $100 million for contract support costs.

There are 330 other tribes out there potentially with contracts that are involved here.

Carter G. Phillips:

It is — and — and just to put it in context, we are talking about — you know, many of these tribes are in incredibly remote situations.

They don’t have access to all the other information about what’s going on.

And the real question is, should you impose–

John G. Roberts, Jr.:

–Are you suggesting that–

Carter G. Phillips:

–that on the tribes.

John G. Roberts, Jr.:

–Are you suggesting that Congress has to go through each of those contracts and say, this is how much we are going to appropriate, this is how much?

Carter G. Phillips:

I think that’s — I actually think that would be the fairer way to do it.

And I don’t think it would be as burdensome as — as your question implies because, again, what else does staff have better to do than to sit down and put all those appropriations together.

John G. Roberts, Jr.:

Well, the question is whether it’s the staff in Congress that’s going to do it or the staff at the Department of the Interior?

Carter G. Phillips:

Well–

John G. Roberts, Jr.:

And I suppose Congress can reasonably determine that the people at Interior know better about how to do it than we do.

Carter G. Phillips:

–Right.

But then — then they could do it by — by — expressly by reference.

I mean, if, in fact, Interior has set it out that way and has it all done, then they can just incorporate it into the statute anyway.

I mean, there are simple ways to do it.

There are broader ways to do it.

And as I said to Justice Sotomayor, clearly Congress could simply, you know, absolve the government of its responsibility to enter into any contract that a — that a — when an Indian tribe shows up at their doorstep.

All of those seem to me preferable than saying to the tribes, after they have fully performed their side of the deal, okay, I’m sorry, we are not going to pay you.

The — the other thing that’s odd about this–

Sonia Sotomayor:

I’m sorry.

You keep saying that, but I thought in your earlier answer you said that the contracts are generally signed by the time of the appropriation.

Carter G. Phillips:

–Right.

Sonia Sotomayor:

Where is that in the cycle of performance?

Is that at the beginning of performance?

Carter G. Phillips:

That’s at the beginning of performance.

But — but what we find out about the notices that we are — that we’ve later received is at some point, we’re sending you 75 percent in some situations, or we’re going to send you exactly the same amount of money you got last year, even though that won’t cover it.

Sonia Sotomayor:

So the tribes — even when the appropriation comes out, they don’t know how much the Department has contracted with other tribes.

Carter G. Phillips:

Right.

We haven’t–

Sonia Sotomayor:

So they’re performing until they get that notice later on.

Carter G. Phillips:

–Exactly.

And, candidly, assume that — either one of two things will happen.

Either we will ultimately be paid in full, which has happened — I mean, the last year, they were in fact paid in full.

Or alternatively, that they will have access to the judgment fund in order to — to get the recovery they are otherwise entitled to.

Elena Kagan:

Mr. Phillips, do you think — and the long question here is what did Congress want.

And what — one answer might be Congress wanted exactly what the government says it wanted.

But another answer might be something different, that actually, Congress wanted there to be unlimited funds for these tribes, but that it wanted to shift the costs of some of those funds to the judgment fund outside of the Interior budget.

Carter G. Phillips:

Right.

Elena Kagan:

Do you — I mean, do you contest the government’s view of what Congress wanted here?

And if so, how?

Carter G. Phillips:

Well, I think the question is it’s unclear what Congress really wanted in this case, and therefore, you ought to construe the — the scheme in a way that is most favorable to the tribes.

And if that means that the scheme operates so as to protect the integrity of the appropriations process and the spending process for a particular year, and prevents us from being able to seek relief outside of this contract support cost appropriation limitation, that makes perfect sense to me, leaving open obviously the availability of the judgment fund at the end of the day so that the tribes do not in fact have to bear the full burden of — of this arrangement as opposed to — as opposed to anyone else.

I mean, that’s — again, we do provide — we’ve performed the services.

We don’t know.

We do it in good faith.

Under those circumstances, it seems to me that’s the classic situation in which we should receive full compensation.

If there are no further questions, Your Honor, thank you.

John G. Roberts, Jr.:

Thank you, Mr. Phillips.

Mr. Freeman, you have 4 minutes remaining.

Mark R. Freeman:

Thank you–

Sonia Sotomayor:

Do you dispute Mr. Phillips’ statement that the tribes don’t know how much they’re getting until some point further into the performance cycle?

Mark R. Freeman:

–In part, Your Honor.

Let me explain.

As I mentioned earlier, for the first many years in this scheme, we did a uniform pro rata distribution methodology.

The tribes came to us and said, look, that’s a problem for us because we don’t have any budget transparency; we can’t see how much we’re going to get.

So we adopted this policy in 2006.

And one of the principal elements of that policy is that it guarantees that, if — as long as Congress appropriates as much money as it did in the previous fiscal year, which it generally has, the tribe will get immediately, like within 2 weeks, the exact amount of money that it received in the previous year.

And that money comes immediately.

They can use it however they want.

It’s not subject to apportionment.

Mark R. Freeman:

Unlike most Federal agencies, we don’t dole it out.

They get it right away.

Now, the question then becomes what to do with any additional money that Congress has appropriated, and the policy provides for distribution of that money on what we call a bottoms-up basis.

We give it to the tribes that are the farthest away from 100 percent of funding.

That resolution was negotiated with the tribes and, indeed, with some counsel for Respondents.

It’s, we think — and I might be wrong about this — but we think that that’s the solution that the tribes want, if the caps have any effect.

There are–

Elena Kagan:

I guess what I don’t understand about the government’s argument, Mr. Freeman, is exactly what the contractual rights of the tribes become.

I mean, as I — this is supposed to be a contract, and we’ve held that it’s a contract, and usually contracting parties have rights to something.

Mark R. Freeman:

–Yes.

Elena Kagan:

So what do they have a right to in your view?

Mark R. Freeman:

Well, first of all, let’s make clear — let’s make sure that we’re not–

Elena Kagan:

That was — that was a straightforward question.

[Laughter]

Mark R. Freeman:

–Well, they have a right, Your Honor, in the first instance to the principal promise that’s under any ISDA contract, which is we give the amount of money that the Secretary would have provided for the program funds, for operational–

Elena Kagan:

No, but what do they have a right to with respect to these additional overhead costs?

Mark R. Freeman:

–Contract support costs.

They have a right as a class to the distribution of every dollar that Congress appropriates, and for every contractor–

Elena Kagan:

What does each individual tribe have a right to?

Mark R. Freeman:

–A proportionate share based on the Secretary’s policy for the distribution of these in light of the caps.

Let me–

Elena Kagan:

So you think they do have a right to a pro rata share?

Mark R. Freeman:

–We think that–

Elena Kagan:

In other words, the Secretary could not say, oh, you know, these tribes have been doing a better job, so we’ll give to them; or these tribes need it more, so we’ll give it to them.

You think that there’s a contractual right to a pro rata share.

Mark R. Freeman:

–We think there’s a contractual right to — and, in fact, the contracts often reference these policies directly.

For example, page 123 of the joint appendix, one of the contracts in this case says you’ll be paid according to the distribution policies adopted by the Secretary.

So in that case, yes, we bound ourselves–

John G. Roberts, Jr.:

I’m sorry.

I didn’t think that was responsive.

John G. Roberts, Jr.:

Does the Secretary — Justice Kagan can defend her own question — but does the Secretary have the discretion to adopt something other than a pro rata distribution when there are not sufficient appropriations?

Mark R. Freeman:

–We think within a range of reasonable solutions after consultation with the tribes, yes.

We don’t–

Ruth Bader Ginsburg:

You must that question–

Sonia Sotomayor:

The system that’s in place does not–

Ruth Bader Ginsburg:

–You must answer that question “yes”–

Mark R. Freeman:

–Yes.

Ruth Bader Ginsburg:

–because that’s exactly what the Secretary did.

Mark R. Freeman:

Right.

Ruth Bader Ginsburg:

You explained that it was pro rata.

Mark R. Freeman:

That’s right.

And–

Elena Kagan:

This is a very — this is a very strange kind of contractual right.

The — the contracting tribe has a right to have the Secretary to use discretion to decide how much the contracting tribe gets.

What kind of contract is that?

[Laughter]

Mark R. Freeman:

–Respectfully — respectfully, Your Honor, that is an exaggeration.

Congress has appropriated since 1994 more than $2.3 billion in contract support cost funds.

We’ve distributed all of that money to the tribes.

All of the tribes here have gotten substantial sums.

Elena Kagan:

No, I’m not contesting — I mean, clearly you think and the Secretary thinks that there’s an obligation to distribute all that money.

Mark R. Freeman:

Right.

Elena Kagan:

And — and I don’t think anybody disagrees with that.

The question is what each individual tribe has a contractual right to.

Mark R. Freeman:

May I answer the question, Your Honor?

Your Honor, once it is clear the caps control the total amount of money that the Secretary may spend, every further question is a question of allocation.

We think we have the policy that’s right — it was negotiated with the tribes and counsel for Respondents — but if we’re wrong about that, we can have that fight another day.

The question here is whether the caps define the maximum amount of money that the Secretary may spend, and we think they do.

John G. Roberts, Jr.:

Thank you counsel, counsel.

The case is submitted.