By Andrew Westney

Law360 (May 8, 2020, 8:49 PM EDT ) As the Treasury Department said Friday it will take weeks longer to deliver the full $8 billion it owes tribes to fight the COVID-19 pandemic, a D.C. federal judge quizzed the government's attorney on how much longer the department can take before the court might be justified in forcing it to distribute the funds.

During a hearing on a bid by the Agua Caliente Band of Cahuilla Indians and other tribes to compel the department to ship $8 billion in direct tribal funding under the Coronavirus Aid, Relief and Economic Security Act, the DOJ's Jason C. Lynch said Treasury had already sent out $4.4 billion of an initial $4.8 billion to tribes based on a plan announced Tuesday.

However, U.S. District Judge Amit P. Mehta said it was "disappointing if not troubling" that a Treasury official had indicated during a recent call that it might take two months for the remaining $3.2 billion of the CARES Act funds to go out, particularly since the agency has already overstepped the April 26 deadline under the law to distribute all of the funds.

Lynch said that Treasury still had not figured out "the exact path forward" for calculating and distributing the outstanding $3.2 billion, but said it would be "weeks, not days" before that happens.

The judge asked how he could know Treasury was moving quickly enough, pointing out the department missed the CARES Act deadline while figuring out how it wanted to use information it requested from tribes, then decided to make its first distribution using tribal population information that was publicly available from the outset.

Lynch said that federal agencies have the right to change their minds and that "imperfection is not unreasonableness," and that the delay had not been "egregious" enough to warrant a writ of mandamus ordering the release of the funds.

"I guess the question would be, if it's not egregious now, at what point, in the government's view, does it become egregious?" Judge Mehta asked.

The judge asked if 60 days would be too long even if the department is being diligent, since the funds were intended to be emergency money to help tribes fight a developing public health and welfare crisis.

"We're not here asking for a blank check," Lynch said, saying that even 60 days would not be "per se egregiousness" as long as the department keeps working hard to get the money out, even if it "had to make corrections in its approach."

The Agua Caliente Band of Cahuilla Indians in California, the Ak-Chin Indian Community in Arizona and six other tribes filed an amended complaint on May 3 saying they would suffer irreparable harm, including cutting off essential services and laying off staff, unless Treasury Secretary Steven Mnuchin immediately disbursed the $8 billion in direct tribal coronavirus relief funding in the $2 trillion CARES Act.

The tribes meet the irreparable harm threshold for a preliminary injunction and temporary restraining order because "many tribal members and non-members alike rely on tribal enterprises for employment and health insurance," and also merit a writ of mandamus ordering Mnuchin to fulfill his duty, according to the complaint.

In separate litigation, the Confederated Tribes of the Chehalis Reservation and more than a dozen other federally recognized tribes are currently fighting to stop any of the $8 billion from going to Alaska Native corporations.

Judge Mehta granted a temporary restraining order April 27 blocking ANCs from accessing the funds.

Under the Treasury Department's plan announced Tuesday, the initial $4.8 billion distribution is based on tribal population information used for the Indian Housing Block Grant, with at least $100,000 going to each tribe.

That money began going out Tuesday and was mostly distributed by Friday, with only about about $162 million being withheld by the Treasury for the Alaska Native corporations if the court ultimately agrees with the department that they are entitled to a share, the DOJ's Lynch said Friday.

The remaining $3.2 billion will be distributed based instead on the number of employees of each tribe and their businesses, as well as each tribe's expenditures to deal with the coronavirus outbreak — a standard that could benefit the Alaska Native regional corporations, many of which have large numbers of employees. 

During Friday's hearing, Keith M. Harper of Kilpatrick Townsend & Stockton LLP, which represents the Agua Caliente and other tribes in the current case, said that in setting a 30-day deadline to distribute the governmental funding in the CARES Act, Congress knew that meeting that deadline would be difficult but still expected Treasury to do so.

In that light, the tribes have met the D.C. Circuit's so-called TRAC standard for assessing mandamus applications established in the case Telecommunications Research & Action Center v. FCC, which includes consideration of the public health consequences of a delayed action, according to Harper.

While Harper said the tribes were "glad" to get the first 60 percent of the funding, "there's no doubt" that the federal government's failure to send out the other 40 percent so far will hurt the tribes.

Harper added that the Agua Caliente tribe received a "relatively modest" disbursement in the first round of funding because it has a smaller population, but that the tribe — which operates currently shuttered casinos and resorts in Southern California — expects to receive "a much greater amount of funds" in the second round based on its number of employees.

Judge Mehta said there appeared to be no case directly on point that a court could issue a writ of mandamus after an agency had only exceeded its allotted time to act by about 50 percent, as Treasury has so far.

Harper said that is attributable to the unprecedented nature of the COVID-19 emergency.

But Lynch countered that the pandemic "is not the first disaster that has befallen the United States" or the first time Congress has passed an emergency funding law, but it's significant that there was no other instance of mandamus relief being used in a similar circumstance.

Lynch also said that the tribes had not made it clear what harm they had suffered from the pandemic so far, and what harm they would suffer if they did not receive the rest of their funding right away.

"The lack of funding does not allow tribes to address the fallout of COVID-19, and that's the irreparable harm," Harper said, and part of that is the "inability to make important decisions," such as whether a tribe can continue to pay certain employees without knowing whether the funding will be in place.

Counsel for the tribes and the government appeared to be closer on the issue of whether tribes could use the funding to cover employee wages, with Harper saying the tribes believe Treasury's guidance indicates that that would be acceptable and Lynch saying it was "possible" tribes could justify those expenses.

Judge Mehta said he would issue a decision "very early next week."

The tribes are represented by Keith M. Harper, Catherine F. Munson and Mark H. Reeves of Kilpatrick Townsend & Stockton LLP.

The Treasury Department is represented by Jason C. Lynch of the U.S. Department of Justice Civil Division, Federal Programs branch.

The case is Agua Caliente Band of Cahuilla Indians et al. v. Mnuchin, case number 1:20-cv-01136, in the U.S. District Court for the District of Columbia.

--Additional reporting by Kelly Zegers and Emma Whitford. Editing by Peter Rozovsky.

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