in the united states district court for the district of ... · 17/05/2015 · in march 2010 the...

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW MEXICO

NAVAJO HEALTH FOUNDATION - )

SAGE MEMORIAL HOSPITAL, INC. )

)

PLAINTIFF, )

)

v. )

)

SYLVIA MATHEWS BURWELL, SECRETARY ) NO. 1:14-cv-958-JB-GBW

OF THE UNITED STATES DEPARTMENT OF )

HEALTH AND HUMAN SERVICES; )

YVETTE ROUBIDEAUX, ACTING DIRECTOR )

OF INDIAN HEALTH SERVICE; )

JOHN HUBBARD, JR., AREA DIRECTOR, )

NAVAJO AREA INDIAN HEALTH SERVICE; )

and FRANK DAYISH, CONTRACTING )

OFFICER, NAVAJO AREA INDIAN HEALTH )

SERVICE, )

)

DEFENDANTS. )

____________________________________________ )

MOTION FOR IMMEDIATE INJUNCTIVE RELIEF

WITH SUPPORTING MEMORANDUM OF POINTS AND AUTHORITIES

Paul E. Frye

FRYE LAW FIRM, P.C.

10400 Academy Rd. NE, Suite 310

Albuquerque, NM 87111

Tel. 505-296-9400

Fax 505-296-9401

Attorney for Plaintiff

Dated: December 22, 2014

Case 1:14-cv-00958-JB-GBW Document 17 Filed 12/22/14 of 32

ii

TABLE OF CONTENTS

I. FACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

A. Sage’s Problems in 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

B. Sage’s Turnaround . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

C. Sage’s ISDEAA Contracting with IHS; IHS’ 2014 Performance

Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

D. IHS’ Declination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

E. IHS’s Other Actions Related to the Unlawful Declination . . . . . . . . . . . . . 8

II. APPLICABLE LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

III. ISDEAA DECLINATION PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

IV. RELIEF ACCORDED BY THE ISDEAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

V. DEFENDANTS VIOLATED THE ISDEAA AND ITS IMPLEMENTING

REGULATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

VI. SAGE IS ENTITLED TO IMMEDIATE INJUNCTIVE RELIEF. . . . . . . . . . . . 20

A. The ISDEAA Permits Immediate Injunctive and Mandatory

Relief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

B. If a Bond or Other Security Is Required, It Should Be Nominal

One. .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

VII. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24


iii

TABLE OF AUTHORITIES

I. CASES

Atchison, Topeka & Santa Fe Ry. Co. v. Lennen, 640 F.2d 255 (10th Cir. 1981) . . . . . . 16

Bass v. Richardson, 338 F.Supp. 478 (S.D.N.Y. 1971) . . . . . . . . . . . . . . . . . . . . . . . . . . 24

California Hosp. Ass’n v. Maxwell-Jolly, 776 F.Supp. 2d 1129 (E.D. Cal. 2011) . . . . . . 24

Cherokee Nation v. Leavitt, 543 U.S. 631 (2005) .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Cheyenne River Sioux Tribe v. Kempthorne, 496 F.Supp. 2d 1059 (D.S.D. 2007) . passim

Crownpoint Inst. of Tech. v. Norton, Civ. No. 04-531 JP/DJS

(D.N.M. Sept. 16, 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16, 20, 21, 23

Cumberland Heights Found. v. Magellan Behavioral Health, Inc.,

No. 3:10-cv-00712, 2010 WL 3522414 (M.D. Tenn. Sept. 7, 2010) . . . . . . . . . . . . . . 22

Earth Island Inst. v. Carlton, 626 F.3d 462 (9th Cir. 2010) . . . . . . . . . . . . . . . . . . . . . . . 23

Equifax Services, Inc. v. Hitz, 905 F.2d 1355 (10th Cir. 1990) . . . . . . . . . . . . . . . . . . . . 22

Guidance Endodontics, LLC v. Dentsply Int’l, Inc.,

633 F.Supp. 2d 1257 (D.N.M. 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Hinsley v. Standing Rock Child Protective Services,

516 F.3d 668 (8th Cir. 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Kerr-McGee Corp. v. Navajo Tribe, 471 U.S. 195 (1985) . . . . . . . . . . . . . . . . . . . . . . . . . 1

Otero Savings and Loan Ass’n v. Federal Reserve Bank of Kansas City, Mo.,

665 F.2d 275 (10th Cir. 1981) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Plant Oil Powered Diesel Fuel Systems, Inc. v. ExxonMobil Corp.,

778 F.Supp. 2d 1180 (D.N.M. 2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21


iv

Prairie Band of Potawatomi Indians v. Pierce, 253 F.3d 1234 (10th Cir. 2001) .. . . . . . 23

Pyramid Lake Paiute Tribe v. Burwell, No. 1:13-cv-01771 (CRC), ___ F.Supp. 3d ___,

2014 WL 5013206 (D.D.C. Oct. 7, 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17, 23

Ramah Navajo School Bd., Inc. v. Babbitt, 87 F.3d 1338 (D.C. Cir. 1996) . . 15, 18-19, 20

Ramah Navajo School Bd. v. Sebelius, No. CV 07-0289 MV (D.N.M. May 9, 2013),

cross appeals filed, Nos. 14-2051 and 14-2055 (10th Cir. Apr. 4 and 10, 2014) .. . . . 16

Red Lake Band of Chippewa Indians v. United States Dep’t of Interior,

624 F.Supp. 2d 1 (D.D.C. 2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

RoDa Drilling Co. v. Siegel, 552 F.3d 1203 (10th Cir. 2009) . . . . . . . . . . . . . . . . . . . . . 24

Salazar v. Ramah Navajo Chapter, 132 S.Ct. 2181 (2012) . . . . . . . . . . . . . . . . . . . . . . . 10

Shadid v. Fleming, 160 F.2d 752 (10th Cir. 1947) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Shoshone-Bannock of Ft. Hall Res. v. Shalala, 988 F.Supp. 1306

(D. Or. 1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12, 15, 19

Shoshone-Bannock Tribes of Ft. Hall res. v. Shalala, 999 F.Supp. 1395

(D. Or. 1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Southern Ute Indian Tribe v.Leavitt, 497 F. Supp. 2d 1245 (D.N.M. 2007),

app. dism’d, 564 F.3d 1198 (10th Cir. 2009), op. after remand, Southern Ute

Indian Tribe v. Sebelius, 657 F.3d 1071 (10th Cir. 2011), cert. denied,

133 S.Ct. 24 (2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim

Star Fuel Marts, LLC v. Sam’s East, Inc., 362 F.3d 639 (10th Cir. 2004) . . . . . . . . . 16, 23

Susanville Indian Rancheria v. Leavitt, No. 2:07-cv-259-GEB-DAD,

2008 WL 58951 (E.D. Cal. Jan. 3, 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17, 23

Temple Univ. v. White, 941 F.2d 201 (3d Cir. 1991), cert. denied,

502 U.S. 1032 (1992) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21, 24


v

Tri-State Gen. and Transm. Ass’n, Inc. v. Shoshone River Power, Inc.,

805 F.2d 351 (10th Cir. 1986) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Winnebago Tribe of Neb. v. Stovall, 341 F.3d 1202 (10th Cir. 2003) . . . . . . . . . . . . 18, 24

II. STATUTES

25 U.S.C. § 450 .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

25 U.S.C. § 450a et seq. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

25 U.S.C. § 450a(a) .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

25 U.S.C. § 450a(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

25 U.S.C. § 450(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

25 U.S.C. § 450f(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 14, 20

25 U.S.C. § 450f(b) .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15, 20

25 U.S.C. § 450f(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 12

25 U.S.C. § 450j-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 18, 24

25 U.S.C. § 450k .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

25 U.S.C. § 450m . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 8, 18

25 U.S.C. § 450m-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 12, 15, 21

25 U.S.C. § 1602(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

25 U.S.C. § 1602(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

III. RULES AND REGULATIONS

Fed. R. Civ. P. 65 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

25 C.F.R. part 900 .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 10


vi

25 C.F.R. § 900.3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

25 C.F.R. § 900.3(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

25 C.F.R. § 900.3(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

25 C.F.R. § 900.22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

25 C.F.R. § 900.23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

25 C.F.R. § 900.24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

25 C.F.R. § 900.25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

25 C.F.R. § 900.28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 15, 20

25 C.F.R. § 900.30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 15, 20

25 C.F.R. § 900.32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 13, 19

25 C.F.R. § 900.33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 12, 13, 19

25 C.F.R. §§ 900.42-.46 .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

25 C.F.R. § 900.45 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

25 C.F.R. §§ 900.47-.60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

IV. OTHER AUTHORITY

President Nixon’s Special Message to the Congress on Indian Affairs

1970 Pub. Papers 564 (1970) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

S. Rep. No. 100-274 (1987) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10, 11, 15

http://www.kaiserhealthnews.org/stories/2013/november/14/value-base-

purchasing-medicare


Plaintiff Navajo Health Foundation - Sage Memorial Hospital, Inc. (“Sage”) hereby

moves for immediate injunctive relief to reverse Defendants’ declination finding (the

“Declination”) of September 26, 2014 under the Indian Self-Determination and Education

Assistance Act (“ISDEAA” or “Act”), 25 U.S.C. §§ 450, 450a et seq., and to compel

Defendant Burwell to award and fund Sage’s self-determination contract and successor

annual funding agreements (“AFAs”) for FY 2014 and 2015. Such “immediate injunctive

relief” is expressly provided for in the ISDEAA, 25 U.S.C. § 450m-1(a). Defendants’

Declination of the self-determination contract violated the ISDEAA and its implementing

regulations and Sage qualifies for such relief under the ISDEAA, as shown below.

I. FACTS

A. Sage’s Problems in 2007

The governing body of the Navajo Nation, the Navajo Nation Council, see Kerr-

McGee Corp. v. Navajo Tribe, 471 U.S. 195, 201 (1985), formally recognized Sage as a

Navajo “tribal organization” under the ISDEAA in two resolutions. Ex. A ¶ 3. Sage

employs approximately 200 people on a campus located on private fee land within the

Navajo Nation at Ganado, Arizona. Ex. B ¶ 3. Since 2004, Sage has contracted with the IHS

to perform healthcare services to a largely Navajo patient population. The three-year 2007

ISDEAA contract is the foundation of the present federal/Sage relationship. Ex. C ¶ 6.

Under previous management and a mostly different Board of Directors (“Board”),

Sage was virtually insolvent and on the verge of being shut down by various governmental


2

agencies in 2007 and 2008. Ex. C ¶¶ 3, 7-8. Sage’s physical plant was dilapidated and

neglected, Sage was in violation of Administrative Orders issued in 1999 and 2006 by the

Environmental Protection Agency (“EPA”), and Sage was being threatened with denial of

its hospital accreditation by the Joint Commission on Accreditation of Health Care

Organizations (“Joint Commission”), with involuntary termination of its certification by the

Centers for Medicare and Medicaid Services (“CMS”), and with losing its Rural General

Hospital Healthcare license by the Arizona Department of Health Services (“ADHS”). Id.

Sage was also unable to retain top-quality health care professionals and managers. See id.

¶¶ 3, 9, 13-14. Thus, prior to January 2007, Sage was forced to terminate general surgery

(including orthopedics and ophthmalology) and obstetrical care for lack of adequate facilities

and/or qualified staff. Id. ¶ 8. And Sage was in litigation with IHS at the time. Id.

B. Sage’s Turnaround

To address these challenges, Sage engaged a third-party management company to turn

around Sage, not only so that Sage could stay in business but also to permit Sage to finance

the development of new facilities and expand services. Ex. A ¶ 5. One of the principals of

the management company was Ahmad Razaghi. Id. After the Board rejected a closure plan

by a former CEO and that person resigned, it requested Razaghi to act as temporary CEO in

October 2007 and he agreed to do so. Id.

The turnaround effort succeeded. Ex. C ¶ 10. From 2007 to 2009 Sage negotiated

with CMS and ADHS to keep Sage open without losing additional services. Id. ¶ 9. Under


3

Razaghi’s leadership, Sage settled its lawsuit against IHS. Id. In September 2009, for the

first time in a decade, Sage received its unconditional ADHS license and CMS certification.

Id. ¶ 10. On May 4, 2009, the Joint Commission awarded Sage its “Gold Seal of Approval”

signifying the highest quality of patient care. Id. In March 2010 the United States Surgeon

General, on behalf of HHS and with Defendant Roubideaux looking on, awarded Razaghi

personally – from out of 679 tribally or federally managed hospitals – the “Chief Executive

Officer Managerial Excellence Award” for “leadership, successes and improvements which

equate to improved and enhanced patient care.” Id. ¶ 10 and Att. 1. In June 2012 Sage

received the American Hospital Association Institute for Diversity’s “Best in Class Hospital

Award” for leadership to address health disparities and improve diversity in governance. Ex.

A ¶ 7. This Best in Class award selected Sage and only one other hospital from 900 hospitals

nationwide. Id.

On January 10, 2012, the EPA determined that Sage had fulfilled all requirements of

its Administrative Orders. Ex. C ¶ 11. On September 12, 2013, ADHS licensed Sage as a

Rural General Hospital through September 30, 2016. Id. The Joint Commission granted

Critical Access Hospital Accreditation to Sage after its survey was completed in March 2014,

stating “[a]s a result of the accreditation activity conducted on the above date(s), there were

no Requirements for Improvement identified.” Id. In each year from 2007 through 2013,

Sage received unqualified, “clean” audits from its independent auditors. Id. All of this was

accomplished notwithstanding IHS’ substantial underfunding of Sage’s contracts in violation


On August 25, 2014, Sage filed a claim for underpayments of contract support costs1

in the amount of $62,569,681. IHS responded on October 23, 2014 stating that it needed

until October 21, 2015 to evaluate the claim. See First Amended Complaint (Nov. 24, 2014)

¶¶ 69-71.

4

of ISDEAA’s requirement that IHS compensate Sage for its administrative costs (“contract

support costs”) associated with Sage’s ISDEAA contracts. See generally Cherokee Nation

v. Leavitt, 543 U.S. 631 (2005). Sage completed its turnaround without eliminating any1

services, and, in fact, has expanded its services during the turnaround. Ex. C ¶ 12.

The turnaround required terminating underperforming employees or allowing them

to resign, including Navajo employees who were politically active. Id. ¶ 14. Some of them

banded together to publicly discredit the Sage Board and management (Razaghi personally).

See id. Att. 2 (sample news article and cartoon based on their allegations). Their allegations

were printed and reprinted in the local press, and ultimately resulted in a non-stop, and often

overlapping, series of investigations by the Joint Commission (on its own behalf for

accreditation purposes and as agent for CMS on fiscal matters), ADHS, the Arizona Health

Care Cost Containment System Office of the Inspector General, and the Health, Education

and Human Services Committee of the Navajo Nation Council. Id. ¶ 15. None of these

investigations ultimately resulted in any findings adverse to Sage. Id.; Ex. B ¶ 4.

C. Sage’s ISDEAA Contracting with IHS; IHS’ 2014 Performance Review

Sage and IHS entered into the original three-year ISDEAA contract in 2007, and

another three-year contract (the “Contract”) in 2010, ending September 30, 2013. Ex. C ¶


Sage will shortly be moving to file a Lodging consisting of the 2010-2013 ISDEAA2

contract and FY 2013 AFA; Sage’s August 22, 2014 proposed FY 2014-2016 ISDEAA

contract and FY 2014 AFA, IHS’ September 26, 2014 declination letter with attached IHS

performance monitoring report and Moss Adams report; Sage’s proposed FY 2015-2017

ISDEAA contract and proposed 2015 AFA, and IHS’ letter dated December 12, 2014

declining such proposal.

5

6. By letter dated August 22, 2013 Sage proposed a further renewal of the Contract for2

another three-year term through September 30, 2016 and a successor Annual Funding

Agreement (“AFA”) for fiscal year 2014 with no material changes in either the budget or the

PFSAs from the prior year. Id. ¶ 16. However, the disgruntled ex-employees had started

their campaign to discredit Sage by then, and IHS did not either approve or disapprove

Sage’s proposed three-year Contract renewal, opting instead to provide Sage funding on a

monthly basis while it investigated the various allegations against Sage. Id. IHS began its

own performance monitoring review and engaged the accounting firm of Moss Adams to

review Sage’s financial records. Ex. D ¶ 4. Sage cooperated fully with IHS and Moss

Adams, ultimately producing approximately 23,000 pages of documents and hosting several

on-site visits by both IHS and Moss Adams. Id. ¶ 5. Sage offered to make its officials

available and to provide additional documents if IHS or Moss Adams required additional

information or clarification. Id. At the outset of the investigation, IHS promised Sage that

it would provide draft reports to Sage for its prior review and comments, so that any errors

could be corrected and any adverse findings or conclusions could be discussed. Id. ¶ 4.


6

D. IHS’ Declination

IHS and Moss Adams began work in January 2014 and Sage satisfied all of their

requests for documents by July 2014. Id. ¶ 6. Sage continued to request the draft reports,

as IHS promised, but IHS did not provide any. Id. ¶ 7. With the end of FY 2014 looming

and without an IHS decision on Sage’s three-year contract proposal, Sage submitted to IHS

by letter dated September 19, 2014 a proposed three-year contract renewal and successor

AFA for FY 2015. Ex. B ¶ 6. Unbeknownst to Sage, Moss Adams had completed its report

on July 25, 2014 and IHS’s review was finished on September 15, 2014. See Ex. B ¶ 7 and

Att. 1 thereto. IHS provided neither of them to Sage until it hand-delivered the Declination

to Sage on September 29, 2014, one day before the end of the fiscal year. Id.; Ex. D ¶ 4.

Although permeated with factual errors and unwarranted speculation and innuendo, neither

the Moss Adams report nor the IHS review identifies any actual instance of misuse of federal

funds, improper patient care, or violation of Sage’s ISDEAA contract.

By letter dated and hand-delivered to IHS on October 2, 2014, Sage pointed out that

the Declination was issued in plain violation of the ISDEAA and its implementing

regulations, and Sage demanded that the Declination be rescinded. Ex. A Att. 1. The

Declination erroneously relies on declination criteria that IHS is forbidden from using in

dealing with a contract renewal and proposed successor AFA that do not differ substantially

from the prior year’s. See 25 C.F.R. §§ 900.32, 900.33. In addition, even if the declination

criteria were applicable, the Declination improperly ignores IHS’ burden to justify any


7

declination on clear and convincing evidence, see 25 U.S.C. §§ 450f(e)(1), 450f(a)(2),

instead purporting to justify the Declination on IHS’ asserted lack of information or

uncertainties, see Complaint ¶ 29 (providing examples of IHS’ attempted burden-shifting).

Because Defendants violated the ISDEAA and regulations, this Court need not address the

merits of actions taken by them, see Cheyenne River Sioux Tribe v. Kempthorne, 496 F.

Supp. 2d 1059, 1068 (D.S.D. 2007). Regardless, Sage’s record of achievements and

recognition by various government agencies (including HHS) and its successful

accomplishment of all PFSAs through the date of Declination show IHS’ statements that the

“service to be rendered to the Indian beneficiaries of the particular program or function to

be contracted will not be satisfactory” and “the proposed project or function to be contracted

for cannot be properly completed or maintained by the proposed contract” are baseless

conclusory statements. See Ex. B ¶ 8, C ¶ 18.

IHS funds provide approximately 53% of Sage’s revenues. Ex. D ¶ 10.

Notwithstanding the speculation and innuendo in the Declination, at no time from 2007

through the Declination did IHS:

1. give notice to Sage asserting that any costs should be disallowed as provided in the

Act, 25 U.S.C. § 450j-1(f);

2. assert “gross negligence or misconduct in the handling or use of funds” which

might permit IHS to rescind the ISDEAA contract and reassume control of the services being

performed by Sage, as provided in 25 U.S.C. § 450m;


8

3. assert any endangerment of the health or safety of any person by Sage which would

permit IHS to rescind and reassume control under 25 U.S.C. § 450m;

4. claim that Sage has failed to comply with the minimum standards for the

management systems used by Sage under 25 C.F.R. part 900 subpart F, including the

rigorous financial management and accounting standards prescribed in 25 C.F.R. §§ 900.42-

.46 or the procurement standards prescribed in 25 C.F.R. §§ 900.47-.60;

5. question any of Sage’s budgets or audited financial reports, cf. 25 C.F.R. § 900.45;

6. suggest that Sage needed IHS’ technical assistance or offer any, cf. 25 C.F.R.

§§ 900.28, 900.30;

7. provide drafts of the reports purportedly justifying the Declination to Sage so that

Sage could explain any ambiguities or correct any errors, as IHS had promised to do; or even

8. discuss any of its concerns with Sage prior to issuing its Declination, see Southern

Ute Indian Tribe v. Leavitt, 564 F.3d 1198, 1204 (10th Cir. 2009), op. after remand,

Southern Ute Indian Tribe v. Sebelius, 657 F.3d 1071 (10th Cir. 2011), cert. denied, 133 S.

Ct. 24 (2012).

Ex. B ¶ 9, C ¶ 19.

E. IHS’s Other Actions Related to the Unlawful Declination

Having waited until the next-to-last day of the contract year to spring the Declination

on Sage, IHS’ actions taken concurrently with and after the Declination have exacerbated the

harm to Sage. With no notice to Sage and at IHS’ direction, the Gallup Regional Supply


9

Service Center (“GRSSC”), a federal facility whose pharmaceutical supplies and preferred

pricing were made available to Sage under section 14 of the 2013 AFA, Ex. B ¶ 14,

immediately cut off pharmaceutical supplies to Sage, endangering patient safety and causing

an immediate and significant cost increase, id. ¶ 10. IHS’ one-day notice left Sage without

malpractice coverage because the Declination eliminated Federal Tort Claims Act (“FTCA”)

protection for its doctors, again jeopardizing patient welfare and causing concern to Sage’s

professional staff. Ex. B ¶ 11; see, e.g., Hinsley v. Standing Rock Child Protective Services,

516 F.3d 668, 672 (8th Cir. 2008) (regarding FTCA coverage). IHS sent its staff to Sage’s

patient communities (called Navajo “Chapters”) to deal with patients allegedly “formerly”

served by Sage, to urge Sage’s patients to go elsewhere (including to IHS’ own Gallup and

Chinle facilities and to a hospital at Fort Defiance, Arizona), to falsely state that Sage is

“closing,” and even to instruct school officials not to release students whose parents had

authorized their children to obtain free vaccinations at Sage, as Sage has done for several

years. Id. ¶ 12. IHS’ Declination expressly “severed” IHS’ relationship with Sage, signaling

that Sage’s proposed three-year contract for FY 2015-2017 and the proposed 2015 successor

AFA would be declined. IHS did so on December 12, 2014, using the same rationale as it

did in the Declination. Ex. B ¶ 6 and Att. 1 thereto.

II. APPLICABLE LAW

This case arises under the ISDEAA, under which Sage has contracted with the United

States to provide health care to a remote region of the Navajo Reservation. The ISDEAA


10

followed President Nixon’s Special Message to the Congress on Indian Affairs, 1970 Pub.

Papers 564 (1970); see S. Rep. No. 100-274 at 2-3 (1987) (“Senate Report”). In the

ISDEAA, Congress found that “the prolonged Federal domination of Indian service programs

has served to retard rather than enhance the progress of Indian people and their

communities,” 25 U.S.C. § 450(a)(1), and “recognize[d] the obligation of the United States

to respond to the strong expression of the Indian people for self-determination by assuring

maximum Indian participation in the direction of educational as well as other Federal

services to Indian communities,” 25 U.S.C. § 450a(a).

The Indian Health Service (“IHS”) of the Department of Health and Human Services

(“HHS”) has historically provided Federal services to Native Americans. Under 25 U.S.C.

§ 450k, HHS, together with the Department of the Interior, promulgated regulations to

implement the ISDEAA, at 25 C.F.R. part 900. Those regulations, binding on IHS, repeat

the congressional findings and declarations of policy, 25 C.F.R. § 900.3, see Southern Ute

Indian Tribe v. Leavitt, 564 F.3d 1198, 1209 n. 4 (10th Cir. 2009), op. after remand,

Southern Ute Indian Tribe v. Sebelius, 657 F.3d 1071 (10th Cir. 2011), cert. denied, 133

S.Ct. 24 (2012), and acknowledge that “each provision of the Act and each provision of

contracts entered into thereunder shall be liberally construed for the benefit of the tribes or

tribal organizations to transfer the funding . . . from the Federal government to the

contractor,” 25 C.F.R. § 900.3(a)(5); see generally Salazar v. Ramah Navajo Chapter, 132

S.Ct. 2181, 2193 (2012) (ISDEAA “is construed in favor of tribes”); Southern Ute Indian


11

Tribe v. Sebelius, 657 F.3d at 1078 (applying canon of construction favoring Indians in

ISDEAA context). It is IHS’ duty to undertake its “best efforts to remove any obstacles

which might hinder Indian tribes and tribal organizations including obstacles that hinder

tribal autonomy and flexibility in the administration of such programs.” 25 C.F.R. § 900.3(b)

(quoted in Southern Ute, 564 F.3d at 1209 n.4).

The ISDEAA puts federal bureaucrats in the awkward position of being responsible

for contracting themselves out of jobs and resources. See Senate Report at 6. So,

notwithstanding the congressional findings and statements of policy, federal agencies erected

numerous roadblocks frustrating the ability of tribes to obtain contracts and funding,

including excessive paperwork, undue delays, inappropriate application of federal

procurement laws, and inadequate funding of contract support costs. Id. at 7-9. In response,

Congress amended the ISDEAA “to give self-determination contractors viable remedies for

compelling BIA and IHS compliance with the Self-Determination Act. The strong remedies

provided in these amendments are required because of those agencies’ consistent failures

over the past decade to administer self-determination contracts in conformity with the law.”

Id. at 37. Then-existing law had made it “virtually impossible for self-determination

contractors to enforce their rights under the Act.” Id. Under the 1988 amendments, and

“[u]nlike the usual civil case where the plaintiff bears the burden of proof by a

preponderance of the evidence, the ISDEAA places the burden of proof in any hearing or on

appeal on the Secretary ‘to establish by clearly demonstrating the validity of the grounds for


12

declining the contract proposal (or portion thereof).’” Shoshone-Bannock of Ft. Hall Res. v.

Shalala, 988 F.Supp. 1306, 1318 (D. Or. 1997) (quoting 25 U.S.C. § 450f(e)).

Those amendments confer original jurisdiction on the federal district courts and permit

the district courts to “order appropriate relief including money damages, injunctive relief

against any action by [a federal agency] contrary to this subchapter or regulations

promulgated thereunder, or mandamus to compel [the agency] to perform a duty provided

under this subchapter or regulations promulgated hereunder (including immediate injunctive

relief to reverse a declination finding under section 450f(a)(2) of this title or to compel the

Secretary to award and fund an approved self-determination contract).” 25 U.S.C. § 450m-

1(a) (emphasis added); Southern Ute, 657 F.3d at 1073. Sage seeks such relief here, as

Defendants’ Declination of Sage’s proposed contract and failure to provide funding violate

the Act and its implementing regulations, and threaten Sage’s viability as a tribal

organization providing top-quality health care to its Navajo patient communities.

III. ISDEAA DECLINATION PROCEDURES

IHS has no authority to use the declination criteria to refuse to renew a term contract,

such as Sage’s. 25 C.F.R. § 900.33 (“Are all proposals to renew term contracts subject

to the declination criteria? [HHS] will not review the renewal of a term contract for

declination issues where no material and substantial change to the scope or funding of a

program, functions, services, or activities has been proposed by the . . . tribal organization.”)


13

(italics added). Similarly, IHS may not decline a proposed successor AFA if it is

substantially the same as the prior AFA. 25 C.F.R. § 900.32 (“Can the Secretary decline

an Indian tribe or tribal organization’s proposed successor annual funding agreement?

No. If it is substantially the same as the prior annual funding agreement . . . and the contract

is with DHHS or the BIA, the Secretary shall approve and add to the contract the full amount

of funds to which the contractor is entitled, and may not decline any portion of a successor

annual funding agreement. . . .”); Cheyenne River Sioux, 496 F.Supp. 2d at 1067.

In cases where IHS may examine an ISDEAA contract proposal under the Act’s

declination criteria (unlike this case, which concerns renewal of a substantially similar term

contract and successor AFA, see 25 C.F.R. § 900.32-.33), the Act sets forth only five

permissible grounds for declination. Under the ISDEAA, the agency

shall, within ninety days after receipt of the proposal, approve the proposal and

award the contract unless the Secretary provides written notification to the

applicant that contains a specific finding that clearly demonstrates that, or that

is supported by a controlling legal authority that --

(A) the service to be rendered to the Indian beneficiaries of the

particular program or function to be contracted will not be satisfactory;

(B) adequate protection of trust resources is not assured;

(C) the proposed project or function to be contracted for cannot be

properly completed or maintained by the proposed contract;

(D) the amount of funds proposed under the contract is in excess of the

applicable funding level for the contract, as determined under section

450j-1(a) of this title; or


14

(E) the program, function, service, or activity (or portion thereof) that

is the subject of the proposal is beyond the scope of programs,

functions, services, or activities covered under paragraph (1) because

the proposal includes activities that cannot lawfully be carried out by

the contractor.

25 U.S.C. § 450f(a)(2); Southern Ute Indian Tribe v. Leavitt, 497 F.Supp. 2d 1245, 1253

(D.N.M. 2007), app. dism’d, 564 F.3d 1198 (10th Cir. 2009), op. after remand, Southern Ute

Indian Tribe v. Sebelius, 657 F.3d 1071 (10th Cir. 2011), cert. denied, 133 S. Ct. 24 (2012).

These are the only permissible grounds for contract declination. Id.; 25 C.F.R. §§ 900.22,

900.24 (“Can a contract proposal . . . be declined for any reason other than the five

reasons specified in § 900.22? No. . . .”); see, e.g., Southern Ute, 657 F.3d at 1079 (“the

Secretary may not decline a contract proposal for exceeding the applicable funding level” for

contract support costs) (internal quotation marks omitted). If an agency violates the Act or

the regulations in declining to enter into a contract or contract renewal, the court need not

address the merits of the agency’s actions, and the proposed contract must be executed.

Cheyenne River Sioux, 496 F.Supp. 2d at 1068.

IHS has the heavy burden to justify a refusal to enter into a contract by providing clear

and convincing evidence of the validity of any declination finding. 25 U.S.C. § 450f(a)(2);

Southern Ute, 497 F.Supp. 2d at 1252. Moreover, IHS may not decline to enter into a

contract with a tribal organization based on an objection that can be overcome through the

contract itself. 25 C.F.R. § 900.23. In addition, if only a portion of a new contract proposal


15

is properly declined, IHS still must approve any severable portion of a proposal that does not

support a declination finding. 25 C.F.R. § 900.25; Southern Ute, 657 F.3d at 1080 n.7.

Finally, even where a contract proposal may be declined or is properly declined in whole or

in part for one of the five permissible reasons, IHS “shall . . . provide assistance to the tribal

organization to overcome the stated objections.” 25 U.S.C. § 450f(b)(2); C.F.R. §§ 900.28

(pre-declination decision requirement for technical assistance), 900.30 (post-declination

decision requirement for technical assistance); Cheyenne River Sioux Tribe, 496 F.Supp. 2d

at 1068. In general, IHS is supposed to work to eliminate obstacles to contracting, not erect

them. Southern Ute, 564 F.3d at 1208 & n.3.

IV. RELIEF ACCORDED BY THE ISDEAA

The Act provides a comprehensive range of remedies for a contractor. 25 U.S.C.

§ 450m-1(a); see generally Southern Ute, 657 F.3d at 1075. In addition to money damages,

these remedies include the otherwise extraordinary remedies of “mandamus to compel an

officer or employee of the United States . . . to perform a duty provided under this subchapter

or regulations promulgated hereunder (including immediate injunctive relief to reverse a

declination finding under section 450f(a)(2) of this title or to compel the Secretary to award

and fund an approved self-determination contract).” 25 U.S.C. § 450m-1(a). The Senate

Report “leaves no doubt that Congress intended exactly what it wrote.” Ramah Navajo

School Bd. v. Babbitt, 87 F.3d 1338, 1344 (D.C. Cir. 1996) (quoting Senate Report at 37);

Shoshone-Bannock, 988 F.Supp. at 1315-16 (quoting same).


16

Thus, a contractor who prevails under the ISDEAA may be entitled to a writ of

mandamus requiring the agency to enter into the rejected contracts, Crownpoint Inst. of

Tech. v. Norton (“CIT”), Civ. No. 04-531 JP/DJS, Dkt. No. 86 at 26 (D.N.M. Sept. 16, 2005);

Cheyenne River Sioux, 496 F.Supp. 2d at 1068-69; immediate payment of the full amount of

a contract renewal improperly declined, id. at 1068; contract support costs, CIT, supra, Dkt.

86 at 25; expectation damages, specific performance and injunctive relief, Red Lake Band

of Chippewa Indians v. United States Dep’t of Interior, 624 F.Supp. 2d 1, 14-19, 24-26

(D.D.C. 2009); expectation damages in certain circumstances, id. at 14-19; consequential

(including intangible) damages, Ramah Navajo School Bd. v. Sebelius, No. CV 07-0289 MV,

Dkt. No. 143 at 72 (D.N.M. May 9, 2013), cross appeals filed, Nos. 14-2051 and 14-2055

(10th Cir. Apr. 4 and 10, 2014); costs incurred by the contractor in performing the services

before a court-mandated execution of a contract, Southern Ute, 657 F.3d at 1083-84;

injunctive relief, prejudgment interest, and attorney fees, see Shoshone-Bannock Tribes of

Ft. Hall Res. v. Shalala, 999 F.Supp. 1395, 1398 (D. Or. 1998).

The specific provision in the ISDEAA authorizing injunctive (including “immediate”

injunctive) relief and mandamus “relieves [the tribal contractor] of proving the usual

equitable elements including irreparable injury and absence of an adequate remedy at law.”

CIT, supra Dkt. 86 at 26 (citing Atchison, Topeka & Santa Fe Ry. v. Lennen, 640 F.2d 255,

260 (10th Cir. 1981) (per curiam); Star Fuel Marts, LLC v. Sam’s East, Inc., 362 F.3d 639,

651-52 (10th Cir. 2004); and Shadid v. Fleming, 160 F.2d 752, 753 (10th Cir. 1947)); accord


http://www.kaiserhealthnews.org/stories/2013/november/14/value-base-purchasing-3

medicare (visited October 21, 2014).

17

Pyramid Lake Paiute Tribe v. Burwell, No. 1:13-cv-01771 (CRC), __ F.Supp. 3d __, 2014

WL 5013206 at *7 (D.D.C Oct. 7, 2014); Susanville Indian Rancheria v. Leavitt, No. 2:07-

cv-259-GEB-DAD, 2008 WL 58951 at *11 (E.D. Cal. Jan. 3, 2008).

No bond should be required of a tribal contractor obtaining the injunctive and

mandatory relief provided for in the Act. Sage has properly performed all of the programs,

functions, services and activities (called “PFSAs”) required under the contract it sought to

renew, Ex. B ¶ 8, and has almost assuredly done so more cost-effectively and competently

than IHS. In vivid contrast to Sage’s numerous awards and accreditations, the hospital run

by the Navajo Area IHS at Gallup, New Mexico, received the worst rating of all hospitals

rated in the United States under the Affordable Care Act. In an article published November

14, 2013 entitled “Nearly 1,500 Hospitals Penalized under Medicare Program Rating,” Kaiser

Health News reported that the “Gallup Indian Medical Center in New Mexico, a federal

government hospital on the border of the Navajo Reservation, will be paid 1.14 percent less

for each patient. . . . North Georgia Medical Center in Elijay is the only hospital besides

Gallup to lose more than 1 percent of its reimbursements: it will lose 1.04 percent.” The3

percentage of Sage’s revenues devoted to patient care in comparison with overhead is greater

than IHS’ and Sage has significantly decreased the percentage going to overhead since it

began contracting. Ex. D ¶ 8(D).


18

The Government is required to pay for medical services to Sage’s patient population

regardless of whether Sage provides them or IHS does. See 25 U.S.C. § 1602(1), (7)

(“Congress declares that it is the policy of this Nation, in fulfillment of its special trust

responsibilities and legal obligations to Indians – (1) to ensure the highest possible health

status for Indians and urban Indians and to provide all resources necessary to effect that

policy; . . . and (7) to provide funding for programs and facilities operated by Indian tribes

and tribal organizations in amounts that are not less than the amounts provided to programs

and facilities operated directly by the [Indian Health] Service.”). IHS has never asserted that

any costs reported by Sage should be disallowed, as provided for in the ISDEAA, 25 U.S.C.

§ 450j-1(f), nor has IHS ever asserted gross negligence in Sage’s handling of funds or any

endangerment of any patient, as provided in the ISDEAA to allow IHS to rescind and

reassume control of Sage’s contracted programs under 25 U.S.C. § 450m. Ex. B ¶ 9, C ¶ 19.

District courts have wide discretion in deciding whether to require and in what amount to set

a bond or other security. Given these facts and the very likely probability that Sage will

succeed on the merits (discussed below), the potential for a loss being incurred by the United

States is so low that no bond should be required. See, e.g., Winnebago Tribe of Neb. v.

Stovall, 341 F.3d 1202, 1206 (10th Cir. 2003) (affirming lack of bond requirement).

V. DEFENDANTS VIOLATED THE ISDEAA AND ITS IMPLEMENTING

REGULATIONS.

IHS’ Declination is entitled to no deference. See Ramah Navajo School Bd., 87 F.3d


19

at 1344 (“The statute itself reveals that not only did Congress not intend to commit

[ISDEAA] allocation decisions to agency discretion, it intended quite the opposite; Congress

left the Secretary with as little discretion as feasible in the allocation of [ISDEAA contract

support funds].”) (emphasis in original); Shoshone-Bannock Tribes, 988 F.Supp. at 1315-17

(rejecting “deferential court review” of IHS decisions under ISDEAA “[g]iven this history

of Congressional concern with agency malfeasance”); see generally Southern Ute, 657 F.3d

at 1078 (canon of statutory construction favoring Indians controls over “general rules of

deference” to IHS’ interpretation of ISDEAA).

Sage’s contract renewal proposal and proposed AFA for FY 2014 are substantially the

same as its approved ISDEAA contract and AFA for FY 2013. Ex. B ¶ 5, C ¶ 16. Therefore,

Defendants’ invocation of the declination criteria was unlawful, and Defendants were

required by law to approve the FY 2014 proposal, including the three-year renewal of the

basic contract and successor AFA for FY 2014, including the GRSCC agreement for FY

2014. See 25 C.F.R. § 900.33 (“Are all proposals to renew term contracts subject to the

declination criteria? Department of Health and Human Services . . . will not review the

renewal of a term contract [such as Sage’s here] for declination issues where no material and

substantial change to the scope or funding of a program, functions, services, or activities has

been proposed by the . . . tribal organization.”) (emphasis added); 25 C.F.R. § 900.32 (“Can

the Secretary decline an Indian . . . tribal organization’s proposed successor annual


20

funding agreement? No. If it is substantially the same as the prior annual funding

agreement . . . and the contract is with DHHS or the BIA, the Secretary shall approve and

add to the contract the full amount of funds to which the contractor is entitled, and may not

decline, any portion of a successor annual funding agreement.”) (emphases added). In

addition, by not sharing information with Sage to permit Sage to avoid the Declination and

by refusing in the Declination to provide Sage with any technical assistance that might be

needed to overcome IHS’ stated concerns, IHS violated the ISDEAA and its implementing

regulations. See 25 U.S.C. § 450f(b)(2); 25 C.F.R. §§ 900.28, 900.30.

These patent violations of the ISDEAA obviate the need to address any reasons that

IHS may advance to support its Declination, and entitle Sage to the strong remedies accorded

by the Act. See, e.g., CIT, supra, Dkt. 86 at 26 (where Secretary had nondiscretionary duty

to approve ISDEAA contract, issuance of writ of mandamus was appropriate) (Parker, J.);

Southern Ute, 497 F.Supp. 2d at 1257 (same) (Johnson, J.); Cheyenne River Sioux, 496

F.Supp. 2d at 1068-69. The same is true of the FY2015 contract renewal and AFA to the

extent it is substantially the same as the prior approved one. See 25 U.S.C. § 450f(a)(4)(B);

Southern Ute, 657 F.3d at 1080 n.7.

VI. SAGE IS ENTITLED TO IMMEDIATE INJUNCTIVE RELIEF.

A. The ISDEAA Permits Immediate Injunctive and Mandatory Relief.

Congress strengthened the remedies available to tribal organizations to deal with cases

like this one. E.g., Ramah Navajo School Bd., 87 F.3d at 1344. The Act provides for money


21

damages typically recoverable in contract actions, including consequential damages, Ramah

Navajo School Bd. v. Sebelius, supra, Dkt. 143 at 28-31, 65-72; contract support costs, CIT,

supra, Dkt. 87 at 2; injunctive relief; and “mandamus to compel an officer or employee of

the United States . . . to perform a duty provided under [the ISDEAA] (including immediate

injunctive relief to reverse a declination finding under section 450f(a)(2) of this title or to

compel the Secretary to award and fund an approved self-determination contract).” 25

U.S.C. § 450m-1(a) (emphasis added).

This is a case where immediate injunctive and mandatory relief is appropriate and

needed. See generally Guidance Endodontics, LLC v. Dentsply Int’l, Inc., 633 F.Supp. 2d

1257, 1277 (D.N.M. 2008) (loss of goodwill, loss of customers, loss of future profits,

diminishment of competitive advantage in the market place and impending bankruptcy are

irreparable harms) (Browning, J.). Without an order compelling Defendants to reverse their

unlawful declination finding and to award and fund Sage’s proposed contract renewals and

successor AFAs, Sage would lose approximately 53% of its revenues, and it would be on the

brink of insolvency in less than one year. Ex. D ¶ 10; see Tri-State Gen. and Transm. Ass’n,

Inc. v. Shoshone River Power, Inc., 805 F.2d 351, 356 (10th Cir. 1986) (“A threat to trade

or business viability may constitute irreparable harm.”); Plant Oil Powered Diesel Fuel

Systems, Inc. v. ExxonMobil Corp., 778 F.Supp. 2d 1180, 1190 (D.N.M. 2011) (same)

(Browning, J.); Temple Univ. v. White, 941 F.2d 201, 219 (3d Cir. 1991) (affirming

injunction requiring payment of certain Medicaid funds to preserve plaintiff’s financial


IHS has recently communicated with Sage’s employees, inducing one to resign by4

stating that the Declination disqualified Sage’s employees from benefitting from IHS’ loan

repayment program. Ex. B ¶ 13.

22

solvency and role as a community hospital serving a disproportionate share of low income

patients), cert. denied, 502 U.S. 1032 (1992); Cumberland Heights Found. v. Magellan

Behavioral Health, Inc., No 3:10-cv-00712, 2010 WL 3522414 at *7 (M.D. Tenn. Sept. 7,

2010) (loss of 45% of revenues could launch health care business into insolvency,

constituting irreparable harm). It would lose the stability of its professional work force,

having painstakingly built up its medical staff over the past six years, and that harm, too, is

significant and irreparable. Ex. B ¶ 13. Sage’s patients would be required (indeed, IHS has4

already urged them) to seek medical services at great distances from their homes and schools,

Ex. A ¶ 8, including at IHS’ Gallup hospital, ranked worst among 1500 hospitals surveyed

nationwide. See n.3, supra, and accompanying text; Otero Savings and Loan Ass’n v.

Federal Reserve Bank of Kansas City, Mo., 665 F.2d 275, 279 (10th Cir. 1981) (granting of

preliminary injunction proper to “prevent the disruption and confusion the termination of [the

Federal Reserve’s processing of checks and drafts for plaintiff bank] would certainly cause”);

Equifax Services, Inc. v. Hitz, 905 F.2d 1355, 1361 (10th Cir. 1990) (loss of customers in

business based on personal contacts and knowledge of their special needs is irreparable).

Sage would be required to purchase pharmaceutical supplies from commercial vendors, and

purchase professional liability insurance for its doctors at a cost of approximately $50,000


23

per month rather than avail itself of FTCA protection at no cost. See Ex. B ¶ 14. The

stigmatizing effects of IHS’ actions on Sage are certain and will worsen if not promptly

corrected by this Court. See Star Fuel Marts, 362 F.3d at 652 (inherent difficulty in

measuring loss of sales volumes and good will is irreparable harm). If injunctive relief is

not granted pending final judgment, it is likely that 200 Navajo employees at Sage will lose

their jobs within eight months and the struggling economy in the Ganado area would go into

a tailspin. Ex. B ¶ 15; see, e.g., Earth Island Inst. v. Carlton, 626 F.3d 462, 475 (9th Cir.

2010) (considering public interest in aiding struggling local economy and preventing job loss

in preliminary injunction context); Ex. E (IHS Charts 2.09 and 2.10 showing median

Household income for Navajos at 45% of national average and 40.4% of Navajos below

poverty level). The public interest in tribal self-determination as expressed by Congress in

the ISDEAA clearly favors Sage’s position. 25 U.S.C. § 450a(b); see generally Prairie Band

of Potawatomi Indians v. Pierce, 253 F.3d 1234, 1253 (10th Cir. 2001).

B. If a Bond or Other Security Is Required, It Should Be a Nominal One.

This motion is brought directly under 25 U.S.C. § 450m-1(a), not Fed. R. Civ. P. 65.

Thus, Sage is not required to prove up the various factors of Rule 65 in order to qualify for

the requested equitable relief. See, e.g., CIT, supra Dkt. 87 at 26 (citing, e.g., Atchison,

Topeka & Santa Fe Ry., 644 F.2d at 260); Pyramid Lake, 2014 WL 5013206 at *7; Susanville

Indian Rancheria, 2008 WL 58951 at *11. Application of the reasoning of CIT and these

other cases should relieve Sage of any obligation to provide a bond or other security as a


24

condition of obtaining the requested injunction.

However, if this Court determines otherwise, it has wide discretion to determine

whether a bond should be required and, if so, the amount of any such bond or other security.

E.g., Winnebago Tribe, 341 F.3d at 1206 (affirming grant of injunction without bond

requirement where there was no proof of likelihood of harm to other party); accord RoDa

Drilling Co. v. Siegel, 552 F.3d 1203, 1215 (10th Cir. 2009); Basis Int’l Ltd. v. Research in

Motion Ltd., 827 F.Supp. 2d 1302, 1311 (D.N.M. 2011); Temple Univ., 941 F.2d at 219

(affirming grant of injunction without requiring hospital to post bond where hospital served

mostly low-income people and would have become insolvent absent the relief); Bass v.

Richardson, 338 F.Supp. 478, 489-91 (S.D.N.Y 1971) (requiring no bond where federal

statute placed “heavy burden” on defendant agency to justify large cutbacks in medical

funding and where Congress had declared public policy that the programs under the statute

should be “vigorously and properly administered”). The United States has ample ways of

recouping any money not properly devoted to patient care, again militating against requiring

a bond. See, e.g., 25 U.S.C. § 450j-1(f); Temple Univ., 941 F.2d at 219-20; California Hosp.

Ass’n v. Maxwell-Jolly, 776 F.Supp. 2d 1129, 1160 (E.D. Cal. 2011). No substantial bond

or other security should be required of Sage in this case.

VII. CONCLUSION

For the above reasons, Sage respectfully requests an Order compelling the Secretary

to immediately execute and fully fund the three-year contract proposal for FY 2014-2016 and


25

the successor AFA for FY 2014, and to execute and fully fund all severable portions of

Sage’s three-year contract proposal for FY 2015-2017 and the successor AFA for FY 2015

to the extent the budget and PFSAs are substantially the same as the prior ones.

Dated this 22nd day of December, 2014.

Respectfully submitted,

FRYE LAW FIRM, P.C.

By: s/ Paul E. Frye

Paul E. Frye

10400 Academy Rd. NE., Suite 310

Albuquerque, NM 87111

Tel: (505) 296-9400

Fax: (505) 296-9401

Attorneys for Plaintiff Sage


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CERTIFICATE OF SERVICE

I hereby certify that on December 22, 2014, I filed the foregoing with the Clerk of the

Court using the CM/ECF system, which will send notification of such filing to the parties of

record in this matter.

s/ Paul E. Frye

Paul E. Frye


in the united states district court for the district of ... · 17/05/2015 · in march 2010 the...

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