Do you remember the class action litigation Keepseagle v. USDA claiming discrimination against Indian farmers and ranchers?   The court approved a settlement of the case in 2011 so why was there yet another court hearing on Monday, June 29th in front of Federal District Judge Emmet Sullivan?  Therein lies an interesting story…..

The original settlement was for $680 million to be shared by Native American farmers and ranchers who had faced discrimination over the years by USDA. Some 3,601 Indian farmers documented discrimination and the vast majority (3,587) received a payment of $50,000 while 14 were eligible for payments up to $250,000.  It turns out, however, that the Government and the attorneys at the time guessed wrong on how many individuals would file successful claims so it has left some $380 million in the pot.

The Class Counsel who has represented the class of those harmed is now at odds with Mr. and Mrs. Keepseagle and many in the class on how to best use the remaining $380 million.  When all the parties to the lawsuit estimated that the remaining funds after individual payments were made would be modest, they all agreed to distribute the unclaimed funds via a “cy pres” disbursement.  Specifically, the terms of the settlement agreement provided that the remaining funds would be distributed to charitable organizations of the Class Counsel’s choosing that support Native American farmers and ranchers.  But given the size of the miscalculation, the Keepseagles and many members of the class are saying: “wait a minute,” the facts have changed and so has our opinion.

At the hearing, Mrs. Keepseagle and a large group of the successful claimants, calling themselves the Great Plains Claimants, asked Judge Sullivan to amend the settlement agreement and approve a supplemental distribution of funds to those harmed (assuming they can document the damages). Judge Sullivan allowed any class member who wished to address the Court to do so and the hearing lasted from 9:00 am to 5:00 pm. Attorneys for the Department of Justice argued that the settlement agreement should not be modified to allow for a supplemental distribution.

The Great Plains Claimants supported the motion of the Keepseagles by pointing to federal Indian policy that for many decades has endorsed self-determination, consultation and Tribal sovereignty.  Indeed just last year President Obama said on the Standing Rock Indian Reservation in North Dakota:

“I know that throughout history, the United States often didn’t give the nation-to-nation relationship the respect that it deserved.  So I promised when I ran to be a president who’d change that – a president who honors our sacred trust, and who respects your sovereignty . . . My administration is determined to partner with tribes, and it’s not something that just happens once in a while. It takes place every day, on just about every issue that touches your lives. And that’s what real nation-to-nation partnerships look like.”

The law with regard to cy pres funds is not clear.Chief Justice Robertscommenting on cy pres settlements (in Marek v. Lane, 134 S.Ct. 1, 8 (2013) said there are “fundamental concerns surrounding the use of such remedies in class action litigation, including when, if ever, such relief should be considered; how to assess its fairness as a general matter; whether new entities may be established as part of such relief; if not, how existing entities should be selected; what the respective roles of the judge and parties are in shaping a cy pres remedy; how closely the goals of any enlisted organization must correspond to the interests of the class; and so on. This Court has not previously addressed any of these issues. Cy pres remedies, however, are a growing feature of class action settlements. In a suitable case, this Court may need to clarify the limits on the use of such remedies.”

It is possible that the Keepseagle case will become the “suitable case” the Supreme Court is looking for to establish the rules for cy pres distributions.Judge Sullivan recognized that no matter how he ruled in the case there was a good chance his decision would be appealed and possible to the Supreme Court.

The Government argued that the Keepseagles’ position, endorsed by the Great Plains Claimants “would create a windfall for successful claimants.” Mrs. Keepseagle, and many of the successful claimants who spoke, objected to that word “windfall” and pushed back asking how can an additional payment be considered a “windfall” if the payment was less than their original damages?

As part of the hearing record, the Court invited comments from the class members. The overwhelming majority of comments, and Tribal resolutions, supported a supplemental distribution. A supplemental distribution would provide an infusion of funds directly to thoseharmed, their families and the communities where the need is the greatest. The rural farming Tribes,where a majority of the claimants live,have some of the highest unemployment rates in the United States…some have an unemployment rate as high as 90%. 

Chairman Harold Frazier of the Cheyenne River Sioux Tribe (left) and Chairman Dave Archambault of the Standing Rock Tribe both testified in support of Mrs. Keepseagle.

The bottom line seems to be that all parties, including the court, signed off on a settlement agreement based on a very large mistake….a mistake that was hundreds of millions dollars off the mark.  No one expected anything close to $380 million would remain available for a cy pres distribution.  Mrs. Keepseagle argued that the fairest way to correct the mistake is to amend the settlement agreement and distribute the remaining funds to those who were injured.  A recent 2015 decision of the 8th Circuit Court of Appeals, In Re Bank America Corp, supports the Keepseagle position, but the 8th Circuit sits in Saint Louis and does not bind Judge Sullivan.  In that case, the Court held that “a cy pres distribution is permissible only when it is not feasible to make further distributions to the class member….except where an additional distribution would be a windfall.” 

Throughout the day, counsel for the government continued to oppose any supplemental distribution to class members for fear of establishing a precedent that might prove problematic in other cases.  Judge Sullivan suggested that all parties try and get together to discuss a settlement but the Justice Department did not seem interested in his suggestion. The parties all await a decision by Judge Sullivan.

Editor’s note: Marilyn and George Keepseagle are represented by Marshall Matz and John G. Dillard of Olsson Frank Weeda Terman Matz PC, as are the Great Plains Claimants (some 560 members of the class.) The 3,601 members of the plaintiff-class are represented by Joseph M. Sellers and Christine E. Webber of Cohen Milstein Sellers & Toll PLLC, Paul M. Smith, Katherine A. Fallow, Jessica Ring Amunson and Carrie F. Apfel of Jenner & Block LLP, David J. Frantz of Conlon Frantz & Phelan LLP, Phillip L. Fraas of Stinson Leonard Street LLP and Sarah Vogel. The USDA is represented by Kathleen Hartnett, Vincent H. Cohen Jr., Judry L. Subar, Amy Powell and Justin Sandberg of the U.S. Department of Justice.

About the author: Marshall Matz specializes in agriculture, food security and Indian law at OFW Law.