Keweenaw Bay Indian Community v. Sebelius

291 F.R.D. 124, 2013 WL 1749927, 2013 U.S. Dist. LEXIS 59336
CourtDistrict Court, W.D. Michigan
DecidedApril 5, 2013
DocketNo. 2:12-cv-115
StatusPublished
Cited by1 cases

This text of 291 F.R.D. 124 (Keweenaw Bay Indian Community v. Sebelius) is published on Counsel Stack Legal Research, covering District Court, W.D. Michigan primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Keweenaw Bay Indian Community v. Sebelius, 291 F.R.D. 124, 2013 WL 1749927, 2013 U.S. Dist. LEXIS 59336 (W.D. Mich. 2013).

Opinion

OPINION AND ORDER

TIMOTHY P. GREELEY, United States Magistrate Judge.

Plaintiff Keweenaw Bay Indian Community has filed a motion for leave to file a second amended complaint. Defendants Kathleen Sebelius, Secretary of Health and Human Services; Yvette Roubideaux, Director of the Indian Health Services, and United States of America argue that the motion should be denied as futile, because the proposed second amended complaint raises claims that plaintiff failed to administratively exhaust. Leave to amend a complaint “shall be freely given when justice so requires.” Fed.R.Civ.P. 15(a). However, “a party must act with due diligence if it intends to take advantage of the Rule’s liberality.” United States v. Midwest Suspension and Brake, 49 F.3d 1197, 1202 (6th Cir.1995). The court may deny leave to amend a complaint where the amendment is brought in bad faith, will result in undue delay or prejudice to the opposing party, or is futile. Crawford v. Roane, 53 F.3d 750, 753 (6th Cir.1995), cert. denied, 517 U.S. 1121, 116 S.Ct. 1354, 134 L.Ed.2d 522 (1996).

Plaintiff filed this lawsuit to collect amounts allegedly underpaid to fund tribal health care services. Medical services are provided under contract with Indian Health Services in accordance with the Indian Self-Determination and Educational Assistance Act, 25 U.S.C. § 450, et seq.

In Arctic Slope Native Association, Ltd. v. Sebelius, 583 F.3d 785 (Fed.Cir.2010), the court explained:

The ISDA was enacted in 1975 to promote tribal autonomy by permitting Indian tribes to manage federally funded services that were previously administered by the federal government. See 25 U.S.C § 450a; Cherokee Nation of Okla. v. Leavitt, 543 U.S. 631, 634, 125 S.Ct. 1172, 161 L.Ed.2d 66 (2005). Transfers of federal programs to tribal control under the ISDA are accomplished through “self-determination contracts” under which a tribe agrees to [126]*126take over administration of a federal program such as an IHS hospital or clinic. 25 U.S.C. § 450f(a). The government is required to provide self-determination contractors with the same amount of funding that would have been appropriated for the tribal programs if the government had continued to operate the programs directly. Id. § 450j—1(a)(1).

Id. at 788.

Plaintiff claims that defendants underpaid contract support costs for the fiscal years 2004 and 2005. At the October 31, 2012, Fed.R.Civ.P. 16 scheduling conference, plaintiff indicated that it planned to amend the complaint to add claims for the years 2006 through 2009. Defendants do not object to plaintiffs request to amend the complaint to add claims for the yeai’s 2006 through 2009, to the extent those claims were presented to and denied by the contracting officer.

Defendants object to the proposed second amended complaint to the extent that plaintiffs request for relief is different from what was presented in the Contract Dispute Act (CDA) administrative claim that the tribe filed before seeking federal court intervention. Defendants maintain that the proposed amendments contain new claims that were not exhausted. According to defendants, plaintiff is requesting damages based upon new rates and new theories that were never presented at the administrative level. Plaintiff asserts that the claims are not new claims, but rather arise out of the same operative facts presented to the contracting officer. Further, plaintiff argues that the contracting officer denied every claim, past present and future, that could be presented. Therefore, plaintiff argues that the claims were effectively exhausted and that it would be futile to require plaintiff to exhaust these new claims.

In Pueblo of Zuni v. United States, 467 F.Supp.2d 1099 (D.N.M.2006), plaintiff filed a lawsuit to recover damages for underpayment of contract amounts awarded under the ISD and ISDA. Defendants filed a motion to dismiss for lack of exhaustion. Plaintiffs CDA claims were for indirect costs calculated under the indirect cost rate. Plaintiff amended these claims to make additional indirect cost claims seeking $339,933.44. Defendants moved to dismiss the damage claims that were not presented under the CDA.

The court found that exhaustion under the CDA was a mandatory jurisdictional requirement that cannot be excused, and further explained:

The CDA does not bar a plaintiff from seeking an amount of damages that exceeds the quantum in the claim to the contracting officer. The excess amount sought however, must spring from the same certified claim. Plaintiff may not seek damages for a new claim — that is, a claim not yet submitted to and decided by the contracting officer. SMS Data Products Group, Inc. v. U.S, 19 Cl.Ct. 612, 615 (1990). A district court, however, could have jurisdiction over an unexhausted claim where the issues in the claims are based on the same set of operative facts.

Id. at 1109-10.

The court decided that if the Tribe simply sought a different amount of relief than the amount that was presented to the contracting officer, then the claim would arise out of the same operative facts. In contrast, if the Tribe requested an amount based on new theories or new claims, then the claims are unexhausted. The court set forth the legal standard:

In Johnson Controls World Services, Inc. v. U.S., 43 Fed.Cl. 589, 594-95 (Fed.Cl.1999), the court addressed whether it had jurisdiction over a counterclaim that had not been presented to the contracting officer. The court found that the counterclaim arose from the same operative facts only to the extent the counterclaim sought an identical amount of relief to the contracting officer’s claim. To the extent that the counterclaim sought a different amount of relief, that relief was based on a different set of operative facts, and the counterclaim could not be heard because it had not been first presented to the contracting officer.
The critical test for determining whether the operative facts are the same in later claims seems to be whether the scheme of adjudication prescribed by the CDA is un[127]*127dermined by the contractor’s claim on appeal — in other words, whether the claim circumvents the statutory role of the contracting officer to receive and pass judgment on the contractor’s entire claim. See, Diversified Energy, Inc. v. Tennessee Valley Authority, 339 F.3d 437, 445 (6th Cir. 2003) (quoting Cerberonics, Inc. v. U.S., 13 Cl.Ct.

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291 F.R.D. 124, 2013 WL 1749927, 2013 U.S. Dist. LEXIS 59336, Counsel Stack Legal Research, https://law.counselstack.com/opinion/keweenaw-bay-indian-community-v-sebelius-miwd-2013.