1 UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT 2 3 4. 5 ELOUISE PEPION COBELL, ET AL., 6 Plaintiffs/ Appellees, v. No. 05-5388 GALE A. NORTON, SECRETARY OF THE INTERIOR, ET AL., 10 Defendants/ 11 Appellants. 12 13 Tuesday, April 11, 2006 14 Washington, D.C. 15 The above-entitled matter came on for oral 16 argument pursuant to notice. 17 BEFORE: 18 CIRCUIT JUDGES TATEL AND BROWN AND SENIOR CIRCUIT 1 JUDGE SILBERMAN 20 APPEARANCES: 21 ON BEHALF OF THE APPELLANTS: 22 MARK B. STERN, ESQ. 23 ON BEHALF OF THE APPELLEES: 24 DENNIS M. GINGOLD, ESQ. 25 Deposition Services, Inc. 6245 Executive Boulevard Rockville, MD 20852 Tel: (301) 881-3344 Fax: (301) 881-3338 info@DepositionServices. corn www.DepositionServices .corn JAD 2 CONTENT S ORAL ARGUMENT OF: PAGE Mark E. Stern, Esq. On Behalf of the Appellants 3; 58 Dennis M. Gingold, Esq. On Behalf of the Appellees 29 JAD 3 PROCEEDINGS THE CLERK: Case number 05-5388, Elouise Pepion Cobell, et al. v. Gale A. Norton, Secretary of the Interior, et al. Mr. Stern for the appellants, Mr. Gingold for the appellees. ORAL ARGUMENT OF MARK B. STERN, ESQ. ON BEHALF OF THE APPELLANTS THE COURT: Good morning, Mr. Stern. MR. STERN: Good morning, Your Honors. May it please the Court, in this appeal, the Court considers an injunction that requires the Department of the Interior to disconnect major communications systems from the internet, keep them from reconnecting other systems, requires Interior to disconnect computer systems between its components, and that requires it to disconnect communications within the Department. THE COURT: Excuse me, counsel, I'm having a little difficulty hearing you. MR. STERN: THE COURT: MR. STERN: THE COURT: MR. STERN: It requires -- disconnect communications among computers within a department. Now, it's not clear what legal plan or what record would justify an injunction of this 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 I'm sorry, Your Honor. Is that -- Is that mic working? Is that better? Much better. JAD 4 1 kind, but the one thing that is clear is that we do not have 2 those circumstances in this case. First, what is the 3 irreparable harm -- 4 THE COURT: If you don't know what circumstances 5 would justify an order like this, how do you know that this 6 doesn't meet the standard? 7 MR. STERN: Well, Your Honor, when I say that I 8 don't know, I find it difficult to imagine that there are any. 9 So, perhaps that's -- 10 THE COURT: You find it difficult to imagine what? 11 MR. STERN: That there are any circumstances that 12 could justify a judicial order requiring a cabinet agency to 13 disconnect major computer systems from the internet. I'm just 14 leaving open in theory the possibility that some circumstances 15 that I cannot imagine -- 16 THE COURT: Well, suppose there was rampant evidence 17 of computer security problems and people hacking into the 18 computers and actually jeopardizing trust information? Trust 19 data? 20 MR. STERN: Your Honor, if that were the case, that 21 -- we're many stages away from that, but even assuming that 22 were the case, it should be clear what this order does. I 23 mean, there has to be a balancing of whatever interests are 24 arguably protected by an injunction and what the real and 25 obvious impact of that injunction is. And, again, as was said JAD 5 1 in our briefs, the Court can imagine what the effect would be 2 if the Court were told to disconnect all of its computers from 3 communicating with each other and the outside world. 4 Now, that problem for the Department of -- 5 THE COURT: Actually, for some of us who don't like 6 the computer business anyway, that would be very pleasant. 7 MR. STERN: But, well let me say that for -- you 8 know, me as a lawyer, I could actually disconnect my computer. 9 It would be a problem. People would get angry with me if I 10 didn't respond on e-mails. Yeah, I could do it. A cabinet 11 agency cannot do that for all the reasons that are spelled out 12 in the declarations and the testimony of this case. 13 THE COURT: Counsel, counsel I don't think you're 14 really focused on Judge Tatel's question. Suppose -- put 15 aside the scope of the injunction. Suppose there was evidence 16 that persons internal to the Department of Interior had used 17 the computer -- the insecure computer situation to steal money 18 away from the beneficiaries by somehow purloining money out of 19 accounts. Suppose that was true. 20 MR. STERN: Well, it wouldn't justify this 21 injunction. And, again, the question -- 22 THE COURT: It would certainly justify an 23 injunction, would it not? 24 MR. STERN: Well, I'm not sure, Your Honor, because 25 the injunction would -- JAD 6 1 THE COURT: You mean if somebody was stealing money 2 away from the Indians, that wouldn't justify an injunction? 3 MR. STERN: Let me be clear, Your Honor. What I 4 mean by that is that it would have -- if an injunction was 5 necessary to deal with irreparable harm, so that for example 6 people are always having problems with -- you know, with 7 financial institutions where there are data being obtained by 8 third parties, all sorts of things happen to them, they 9 generally don't then go in and get an injunction against 10 Citibank to require a disconnect from the internet, and what 11 happens is they're made whole by Citibank -- 12 THE COURT: Wait a minute. That goes to the scope 13 of the injunction. But if there were evidence in this case 14 that money were being taken away from the accounts in some 15 fashion by people internal or externally, that would certainly 16 justify an injunction of some kind, would it not? No? 17 MR. STERN: No, the reason I'm -- Your Honor, I'm 18 not trying to be difficult. My only point is that an 19 injunction has to be premised on the idea that an injunction 20 is necessary because there is irreparable harm, so that if, in 21 fact -- 22 THE COURT: Oh, in other words there wouldn't be 23 irreparable harm because they could get their money damages, 24 is that your theory? 25 MR. STERN: No, not just money damages, but would JAD 7 1 have to be, look -- 2 THE COURT: I thought the government -- Interior 3 Department was a trustee. 4 MR. STERN: Of course it's a trustee -- 5 THE COURT: You don't need to show irreparable 6 injury to -- I wasn't aware of the fact that you needed 7 irreparable injury to enjoin a trustee from violating the 8 trustee's trust obligations. 9 MR. STERN: Of course you are, Your Honor. There's 10 no -- these -- the rules of -- the rules of equity are not 11 suspended for a trustee. What this Court has said is that a 12 court will -- duties are rooted in statutes, but that a 13 court's equitable powers can be -- 14 THE COURT: Suppose I had a -- supposed I had a 15 trust -- personal trust. Which I don't. But suppose I did. 16 And suppose the trustee, instead of keeping the trust assets 17 in a bank, kept it in a box in front of his house. Are you 18 suggesting that if I went to court and sought an injunction to 19 protect my trust assets, I would lose because I hadn't shown 20 that anybody had tried to take the money out of the box? 21 MR. STERN: But, I mean, your credit -- you would 22 have shown imminent irreparable harm, I assume is the 23 predicate of -- 24 THE COURT: Nobody's tried to get into the box at 25 all. It's been there for two years. Everybody's just walking JAD 8 1 past -- 2 MR. STERN: That's right. If you could demonstrate 3 that no reasonable -- that a reasonable trustee would not keep 4 trust assets in a box in his home, which I assume would be an 5 easy showing to make, that would be -- 6 THE COURT: Well, but isn't the question here 7 whether or not keeping trust assets in a box in front of the 8 house is the same as keeping them in an unsecured computer 9 system? 10 MR. STERN: Well, Your Honor -- 11 THE COURT: Isn't that true? That's the question. 12 Isn't it? 13 MR. STERN: The - there are similarities -- in the 14 sense there are similarities and it's -- 15 THE COURT: (Indiscernible) degree and it's also a 16 question of fact, correct? 17 MR. STERN: There are questions of fact -- 18 THE COURT: And we have a District Court finding 19 here of imminent risk to an unsecured computer system. 20 MR. STERN: Your Honor, what we do not have -- we 21 have a statement of that. That is not tied to anything. And 22 we have to -- look, we don't have -- 23 THE COURT: Excuse me -- 24 MR. STERN: -- there is a class here -- 25 THE COURT: -- the Court cited -- excuse me, the JAD 9 1 District Court cited evidence in the record of security 2 breaches. 3 MR. STERN: Your Honor, security breaches -- what 4 we're talking about here are a situation in which you have 5 endless numbers of things to do under the FISMA Scheme. And 6 anybody in any agency can go through and say, oh you didn't do 7 this, there's a problem over here, and so forth. Here's what 8 we do not have. Just as in this Court's IT opinion where the 9 Court said there is no evidence at that time that anyone other 10 than the special master had ever hacked into a computer system 11 -- lTD today after a 59-year trial, after 10 years of 12 litigation -- 13 THE COURT: There's no evidence in my hypothetical 14 that anyone tried to break into the box and steal my trust 15 assets. 16 MR. STERN: Well, Your Honor, there's no evidence 17 that any private trustee would have breached any duty to 18 maintain trust records by keeping trust data in this kind of a 19 computer system. 20 THE COURT: Counsel, it seems to me you're making an 21 argument that's far in excess of anything unique in this case, 22 and I'm sort of mystified. Maybe part of the problem with all 23 this litigation is there's such extreme arguments presented by 24 both sides and extreme language; particularly in the 25 plaintiff's briefs. But I am troubled by your -- it sounds to JAD 10 1 me that you're taking the position now that it was 2 inappropriate for the District Judge to even consider a 3 security problem with respect to the trust accounts. 4 MR. STERN: No, Your Honor. That's not our position 5 at all. 6 THE COURT: So, then if it was legitimate fraud, I'm 7 sure that it would not be very wise to take that position 8 since it would be directly counter to an opinion of this 9 Court, but assuming that's true, then it's certainly possible 10 that some breaches of security could affect the possibility of 11 giving the plaintiffs relief in this case and could affect the 12 trust duty of the government, couldn't it -- isn't that true? 13 MR. STERN: Yes, Your Honor. 14 THE COURT: So, why were you fussing with Judge 15 Tatel's hypothetical and suggesting that, gee, there's nothing 16 that could happen here that would justify any kind of an 17 injunction? 18 MR. STERN: Your Honor, if I -- if I said that, I 19 did not mean to say that. That was not the position we took 20 in the briefs, it's not the position that I mean to take here 21 this morning. Our position is, indeed, much simpler and it 22 really does -- and it really isn't a very far-reaching 23 position as Your Honor suggests because I don't think that we 24 need to go very far. 25 THE COURT: Now, let me ask you another question JAD 11 1 about the federal legislation. What is it -- 2 MR. STERN: FISMA? 3 THE COURT: FISMA. It's not clear to me reading 4 your briefs that I understand your view as to the relationship 5 between FISMA and your fiduciary obligations. Is it your 6 argument that your fiduciary obligations are limited to 7 compliance with FISMA? 8 MR. STERN: I think that certainly one can't examine 9 the fiduciary duties without reference to FISMA, but again the 10 -- here it's really -- 11 THE COURT: There's a simple yes or no answer to 12 that question. 13 MR. STERN: Well -- 14 THE COURT: You can then explain it. 15 THE COURT: You do argue -- the government does 16 argue in its brief that FISMA controls -- the FISMA standard 17 controls the case. 18 MR. STERN: Well -- 19 THE COURT: It's not quite clear that you argue 20 that, Judge Tatel. They sort of suggest it, but they don't 21 argue it. 22 MR. STERN: Well, what we think is this, is that 23 what this Court has said is that the duties are fiduciary in 24 the government context that was rooted in the statute, but 25 they can be filled out by common law duties. JAD 12 1 Now, whether or not -- we're leaving open the possibility 2 -- the plaintiff's theory is you have -- the only duty that 3 they cite is the common law duty, and they talk about it on 4 page 26 of their brief. They say you've got a common law duty 5 to maintain the trust records, which we don't find. 6 Let's take that on its terms. You come in, you have a 7 lawsuit. You don't show that in any respect what's happening 8 with these records breaches a standard of care that would have 9 given rise to an action against the -- 10 THE COURT: Would you like to answer my question 11 now, counsel? Would you like me to repeat it now? Is it your 12 view that compliance with FISMA exhausts any fiduciary duty 13 you owe to the beneficiaries of this trust, and if you're in 14 compliance with FISMA, whatever that means, that's the end of 15 the game? 16 MR. STERN: I think that at bottom that is the 17 answer, Your Honor, however the assumption -- and the reason 18 that -- 19 THE COURT: Or, you could have a situation where 20 somebody was stealing money out of the trust and still be in 21 compliance with FISMA, couldn't you? 22 MR. STERN: I mean, and that's why -- 23 THE COURT: That's why it's a little difficult to 24 make the argument you're making. But you're making it anyway. 25 MR. STERN: Your Honor, what we say is this, that JAD 13 the kind of relief that would have to be ordered -- and it's very difficult to talk about this in the abstract because we really wouldn't have -- THE COURT: Yeah, that's like hypotheticals, right? THE COURT: You know, I also don't understand how your response to Judge Silverman is consistent with Cobell VI. In Cobell VI the Treasury Department argued that the destruction of certain records complied with the Archived Document Destruction Act. And we rejected that. We said the obligation to destroy check records more than six years old, !Icannot excuse Treasury from its fiduciary obligation.!I Isn't it exactly the same issue? MR. STERN: Your Honor, it is not a crucial part of our argument in this case -- THE COURT: But you just -- the only reason I ask question is when you answered Judge Silverman's you said, !Iat bottom that is our position!I. MR. STERN: THE COURT: MR. STERN: THE COURT: the bottom? I think that -- That FISMA is ultimately controlling. I think -- I really took the -- At bottom -- the drain just went out of Look, we -- I don't mean to tease you too much, but 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 you that question, MR. THE STERN: COURT: the truth of the matter is that can't possibly be your JAD 14 1 position, is it? 2 MR. STERN: Our position, Your Honor, is -- you're 3 probably right, but our position is that if plaintiffs had 4 come in and had demonstrated a problem -- a real problem that 5 some form of injunctive relief might have been appropriate, 6 that it would have to be based on a real problem, a violation 7 of a real -- relief would have had -- 8 THE COURT: But FISMA has nothing to do with -- 9 MR. STERN: Excuse me, Your Honor. 10 THE COURT: This statute really has nothing to do 11 with the case then, does it? 12 MR. STERN: Your Honor, I think the statute is 13 relevant because what it does show -- and I'll tell -- I mean, 14 I'll tell you why I think that it's relevant. First of all, 15 it's the statute that the plaintiff's like relied on initially 16 when they brought their TRO and P1, but the -- but we think 17 the statute is relevant because what it does is it puts into 18 context the kinds of problems that agencies face, it 19 emphasizes the need to prioritize risks, to look at -- to 20 conduct matters on a system-wide basis, and to make cost 21 effective decisions, and a lot of this trial -- in fact most 22 of the trial was not -- has nothing to do with dangers to IITD 23 in particular at all. It was just lots of discussion about 24 what's going on under the FISMA. And that's one of the 25 reasons we talk about the FISMA is to explain that, look, that JAD 15 1 can't be the basis for plaintiff's claim -- 2 THE COURT: Mr. Stern, let me ask you this. If I -- 3 if we -- if I didn't accept your argument about the FISMA -- 4 assume I just don't accept that as a foundation for the 5 defendant's trust duties here, then also assume for a minute 6 that I don't accept your argument that the absence of evidence 7 of a break-in is dispositive, okay? Then to me the case comes 8 down to the District Court's finding of imminent risk. That's 9 what the District Court has done; he's held a 60-day hearing. 10 He's, on the basis of the record, concluded that there's an 11 imminent risk and he's ordered a remedy based on that. And I 12 don't see anywhere in your brief beyond your argument about 13 FISMA and the argument that a break-in is required that his 14 imminent risk finding is clearly erroneous. 15 MR. STERN: I don't think that that's right, Your 16 Honor. I mean -- 17 THE COURT: In fact, I couldn't find the words 18 clearly erroneous in your brief. 19 MR. STERN: No, we are -- I mean, we're not arguing 20 that -- 21 THE COURT: You see the reason I'm asking you the 22 question. If you're wrong about FISMA and if you're wrong 23 about the dispositive effect of there not having been evidence 24 of a non-Interior Department break-in -- that is, someone who 25 wasn't the IG -- if you're wrong about both of those, then 16 what we're left with as an appellate court is a district court finding of imminent risk. And you haven't challenged it as clearly erroneous. MR. STERN: Your Honor, what we do cite are statements like if -- look, even imagine that somebody actually for the first time not only got in the front door, which is what these contractors did -- let's assume that they were then able to sort of open interior doors, so to speak, and get further in, okay, what hasn't happened. Then let's suppose that they actually do something. Now, at the point that they would actually do something, there is no showing that anything would be irreparable. I mean, what Diann Sandy, plaintiff's witness, said -- THE COURT: Then if there's no evidence that anything would be -- so, your argument is that -- see, now you're back to where you were at the beginning, I think, that there's no basis for injunctive relief at all because even if the money was stolen, MR. STERN: THE COURT: MR. STERN: THE COURT: You said, !IThere!s no evidence of irreparable harm.!I That's what you just said. MR. STERN: Yes, Your Honor. There is no evidence the Court could order it repaid. Right? Your Honor, no, that's not -- That's what you just said. Your Honor -- JAD 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 of irreparable harm. JAD 17 1 2 3 4 5 6 7 evidence 8 examples 9 computer 10 11 is, Your 12 13 14 -- look, 15 criminals 16 they were 17 you know, 18 19 20 21 22 23 24 25 internal THE COURT: But there is evidence in the record of computer fraud -- MR. STERN: Excuse me, Your Honor? THE COURT: Internal computer fraud. MR. STERN: Fraud? THE COURT: Yes. There's evidence -- there's record of it. The District Court pointed to several of employees of the Department committing internal fraud. MR. STERN: I have to just -- I'm not sure what that Honor. And there are certainly -- THE COURT: All right, here I'll -- MR. STERN: I mean, again, that doesn't have to do if you had -- let's assume that you had five in the Department who did something, you know, and caught. That doesn't mean that you have sever -- I've got a good idea; let's sever your computer communications. THE COURT: Why don't you take a look at your -- do you have a joint appendix in front of you? MR. STERN: Excuse me, Your Honor? THE COURT: Do you have the joint appendix in front of you? MR. STERN: All of it? THE COURT: Well, do you have page 445. It's the JAD 18 accounts? MR. STERN: THE COURT: MR. STERN: have explained in his incidents of computer THE COURT: MR. STERN: some -- evidence -- MR. STERN: He -- there's no claim by a single one of the $500,000 class -- $500,000 class members -- THE COURT: So, I -- so, there has to be evidence not just that the Interior's computer system is vulnerable, but that there is specific evidence that these trust funds have been accessed, right, that's your position? MR. STERN: Yes. Of course. I mean, you can't look -- let's imagine -- THE COURT: Well, let me go back -- can I go back to my hypothetical? Of my trust funds being kept in a box on the District Court's decision. He points to -- he points to two instances in '04 of computer fraud by employees that resulted in substantial losses to the government. (Indiscernible) -- THE COURT: (Indiscernible) involve Indian trust No. I mean, all this -- Is that your answer? Well, Your Honor, this says that they personal familiarity with the two fraud -- Right. -- by career employees which resulted in 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 THE COURT: Substantial loss. Well, there is JAD 19 1 street? 2 MR. STERN: Yes. 3 THE COURT: I mean, are you seriously telling me 4 that if there is evidence that the computer system in which a 5 trustee is keeping -- let's drop my hypothetical. If there's 6 evidence that the computer system in which a trustee is 7 keeping trust resources, trust assets, has been broken into, 8 is vulnerable, that people have committed computer fraud, that 9 the Court could not enter injunctive relief because there 10 isn't evidence that the particular trust account wasn't broken 11 into? 12 MR. STERN: Yes, Your Honor -- 13 THE COURT: That's your position? 14 MR. STERN: Your Honor, there is not an invulnerable 15 computer system in this country -- 16 THE COURT: Let me be sure; that's the government's 17 position. It's not the -- before the trustee -- before the 18 Court can grant injunctive relief in a trust situation, there 19 has to be actual evidence that the trust account at issue was 20 threatened -- 21 MR. STERN: Or, subject to imminent risk of harm; 22 yes. 23 THE COURT: Well, that's what the District Court has 24 found -- 25 MR. STERN: Your Honor -- JAD 20 1 THE COURT: -- and you haven't made a challenge -- 2 clearly erroneous challenge -- 3 MR. STERN: Your Honor, that -- that conclusion does 4 not connect to any actual subsidiary real findings for -- 5 THE COURT: Well, had you made this argument in your 6 brief, you might have a case, but I don't see it. 7 MR. STERN: Your Honor, we tried to make that point 8 in our brief -- many points, including the statements about 9 what would happen if somebody managed to get it out. There's 10 endless testimony about the various security systems that are 11 in there, about -- it has to be understood there's penetration 12 testing, which is the basis of all this, but the contractors 13 themselves they use say, look, there's not a system in the 14 world, Mahach says, that could withstand this. In fact, 15 there's -- 16 THE COURT: What's the government's objection to the 17 District Court's request that it look into segregating these 18 accounts? 19 MR. STERN: Your Honor, the reason -- it's not that 20 the government hasn't looked into segregating it. The 21 government has looked into segregating it. What Mr. Brown -- 22 when the Court says why haven't you segregating Minerals 23 Management Service? (Indiscernible), Your Honor, that would 24 cost $40 million to do -- 25 THE COURT: I agree about the Mineral Management. JAD 21 !Jhat about other agencies? Couldn't it be done in other agencies? MR. STERN: Your Honor, it's unclear -- what Interior has done at various points, as it says in its testimony, it's tried to segment in various ways by giving extra protection to trust data. What the testimony is is that -- is that Interior has given trust data priorities well beyond what the actual risk to it is because of this litigation -- THE COURT: MR. STERN: look, segregating -- segregating them out and that's the last -- THE COURT: No, but isn't -- but doesn't this avoid the unplugged computer problem. MR. STERN: No, but, Your Honor, the point is segregating, you -- THE COURT: MR. STERN: THE COURT: to me in a simple sentence or two. Why is it that segregating the accounts doesn't solve your problem? MR. STERN: Because, look, Mr. Brown does testify Is that the same as segregating it? No, Your Honor. And the problem -- you can make things increasingly safe by until you just have an unplugged computer 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 If it's segregated -- -- every time you can like -- Just explain to me why -- just explain about that and we cite that in the brief, and he explains, JAD 22 1 look, as long as you're going to still have things being 2 online, you're still going to have exposure. The only way you 3 get out of these problems really is -- I mean, and this is 4 another thing that the FISMA sort of gets at, is the goal is 5 not to sort of maximize security against risks that don't 6 exist with out regard to functionality. The other hand is to 7 make the best use of the data you have and if you're going to 8 expand the uses of the data, of course you also increase 9 vulnerabilities and you've got to make an adjustment is the 10 actual risk to this data such that it justifies -- 11 THE COURT: Counsel, let me -- 12 MR. STERN: -- restricting the -- 13 THE COURT: -- if I may ask a couple of questions. 14 If I understand your position, your first position is there is 15 no justification for this injunction because there's no 16 showing of a imminent threat to these trust accounts because 17 there's no showing that anybody penetrated the computer system 18 directed towards the trust accounts. Is that correct? 19 MR. STERN: That's part -- 20 THE COURT: Wait, wait, let me -- that's one of your 21 arguments. Now, I'm puzzled. I thought you did clearly 22 contend that the injunction was improper for that reason, but 23 Judge Tatel says, well, it's a finding of fact and you never 24 said it was clearly erroneous. I'm not sure that -- I'm not 25 sure I understand your answer to that. I'm not sure you have JAD 23 1 to say it's a finding that's clearly erroneous in an equitable 2 situation, but what is your response to that? Because I 3 understood your argument to be -- 4 MR. STERN: We -- 5 THE COURT: -- that there's no need for an 6 injunction because -- there's no premise for an injunction 7 because there's no showing of a potential penetration of the 8 trust accounts. 9 MR. STERN: No, that's right. I mean, look, we -- 10 THE COURT: Well, all right. What do you say to 11 Judge Tatel saying, well, you didn't really challenge the -- 12 MR. STERN: No, we -- 13 THE COURT: -- finding of fact. No? 14 MR. STERN: Excuse me, Your Honor. Let me correct. 15 The brief -- and the brief speaks for itself obviously -- 16 THE COURT: Oh, I wish that were true. 17 MR. STERN: The -- what we have -- we have stressed 18 throughout the brief that there is no showing of imminent 19 irreparable harm. We say that over and over again and we 20 explain why we think that. I mean -- 21 THE COURT: Did you use the term !Iclearly 22 erroneous!I? 23 MR. STERN: No, I don't think we used the term 24 !Iclearly erroneous!I. 25 THE COURT: But your argument is that there's no JAD 24 1 showing of imminent harm because there's no evidence of a 2 break in. 3 MR. STERN: Excuse me, Your Honor? 4 THE COURT: There's no evidence of a break in 5 because the test. 6 MR. STERN: That's not the only reason that we think 7 that there is no evidence of irreparable harm. 8 THE COURT: That's my question. What's the other 9 reason? That was my question. 10 MR. STERN: The -- the -- that's part of it, but 11 also there is the whole system of secondary checks that would 12 come into play. There's the absence of any showing that if 13 somebody -- that if you got much further in than any person 14 has ever gotten, that you would be able to do something that 15 would result in irreparable harm as opposed to creating 16 problems. Mr. Brass, the IG contractor, says, look, it's one 17 thing for me to maintain sort of -- he talks about flying 18 under the radar and keeping a low profile. He says as long as 19 I'm just looking at things, but if I were to try and delete 20 accounts or try to get money out, he says, now that's 21 different. 22 That's what he -- that's the IG contractor -- 23 THE COURT: If I may review what I understand to be 24 your case. Number one, there's no showing of the irreparable 25 harm for the grounds that you've just described. Number two, JAD 25 1 even if there was, the injunction is much too broad. 2 MR. STERN: Yes, Your Honor. 3 THE COURT: All right. I think those are your basic 4 two arguments. Although it's sometimes difficult to penetrate 5 your brief to find those two arguments. 6 Now, I want to ask you a question concerning petitioners' 7 point in which I think you slough in your brief. Petitioners 8 argue that there is tension between the cases on this Court of 9 Appeals; particularly -- if I can remember my numbers 10 correctly, Cobell VI and is it XI or XII -- 11 THE COURT: Twelve -- 12 THE COURT: -- as compared to XVII and the one I sat 13 in in the -- 14 THE COURT: (Indiscernible) 15 THE COURT: Right. Now -- and that is relevant to 16 our FISMA discussion, too, because the government has 17 traditionally argued that this is an APA case. Plaintiffs 18 have argued this traditionally is a trust case. Our opinions 19 have tried to straddle to a certain extent, although it is 20 fair to say that in 13 we sort of dismissed APA, and then we 21 brought it back a couple of times. 22 Now, petitioners argue this is tension in our cases. You 23 say no tension at all; Court of Appeals acts with one voice, 24 everybody knows that. Well, don't petitioners have a point? 25 Aren't -- isn't there some tension in our cases? JAD 26 1 MR. STERN: No, Your Honor. I really don't -- 2 THE COURT: Oh, come on. We said in -- was it 13 we 3 said APA is irrelevant and the last two cases in the 4 structural injunction we said APA is relevant -- 5 MR. STERN: This is an argument that petitioners 6 made, plaintiffs made to the second structural injunction 7 panel that there was tension and that the structural 8 injunction in that panel, if it persisted in the bad ways that 9 the previous structural injunction panel would continue to 10 fall in into a trap. And this Court didn't accept it then and 11 it shouldn't accept it now, and the reason for that, I 12 think -- 13 THE COURT: Well, whether we accept it is a separate 14 question. As a lawyer, don't you see certain tension in our 15 cases? It may be dicta in one case as opposed to a holding in 16 another, but isn't there some tension? 17 MR. STERN: I think that Judge Williams' opinions in 18 the two second structural injunction opinions go back and 19 discuss the 240 F.3d, the first case in considerable detail -- 20 THE COURT: What about Judge Rogers opinion with, I 21 think Judge Ginsburg and Judge Randolph on it in which they 22 say specifically APA doesn't apply. 23 MR. STERN: That's right. Well -- 24 THE COURT: Is that consistent with the structural 25 injunction? JAD 27 1 MR. STERN: What the Court said there is you don't 2 get Chevron deference. And this Court -- 3 THE COURT: They said APA doesn't apply. Didn't we 4 say that? 5 MR. STERN: I don't remember if -- 6 THE COURT: I thought we did. 7 MR. STERN: -- but that wouldn't have been 8 consistent with the first of this Court's opinions -- 9 THE COURT: Oh, 6 actually doesn't say APA doesn't 10 apply. It's more in -- 11 MR. STERN: Well, the Court specifically based -- it 12 says how am I looking at this, what case do I have in front of 13 me, and it says it's a 7061, and that's how it -- 14 THE COURT: But it seems to me petitioners are 15 right, is there's some tension. Now -- 16 MR. STERN: Even if there's some tension, Your 17 Honor, I mean what we're saying is this. The one thing that 18 we know about this Court's last IT opinion -- we know a couple 19 of things. First of all, they vacated the actual injunction 20 in front of them and that's what they were doing so they 21 didn't have to consider all the other ramifications of the 22 injunction. 23 We also know that it -- 24 THE COURT: So, you're suggesting the APA line was 25 just dicta. JAD 28 1 MR. STERN: Whether or not -- 2 THE COURT: It's a legitimate point. 3 MR. STERN: I think that it is dicta, but let's also 4 be clear at that point there had never been a trial on 5 information technology security, so the Court was looking at 6 sort of statements going back to 2001 and it's saying, look, 7 in 2001 you guys admitted that there was a problem and now 8 you're complaining that the District Court is continuing to be 9 involved with IT security, you know even though the special 10 master regime is over, and what the Court said is, no, the 11 Court can stay involved in that and the government is wrong in 12 thinking that the case is purely about an accounting. 13 And a week later in 392 F.3d this Court said exactly the 14 same thing, and I know because I was arguing that point in 15 both cases, I lost that point in both cases. But what the 16 Court said in both is, no, it's not just about an accounting. 17 They said that twice. 18 THE COURT: If you look through our opinions, I thin 19 you can come to the conclusion that there's a trust obligation 20 which is in some respects greater than the government's 21 obligation under APA, yet APA is relevant with respect to the 22 means in which the government conducts its trust obligation, 23 which for me would be one way of trying to pull them together, 24 but I don't think the government ever makes any effort in its 25 brief to try to pull them together. JAD 29 1 MR. STERN: Well, what we say is this. If you take 2 plaintiffs common law claim here at face value -- they don't 3 do very much to explain what their common law claim is, and 4 the one thing that can't be is you can't just go over this -- 5 what the District Court essentially says is -- 6 THE COURT: Do me a favor. Would you go back for 7 rebuttal time and think about how we should conceptually 8 relate the APA with the trust obligation. Think about it. I 9 don't think the government has done a very good job of 10 suggesting how those two concepts relate together. You simply 11 argued APA, plaintiffs simply argue trust, and it's like ships 12 passing in the night. But I ask you to consider that. 13 MR. STERN: I accept that, Your Honor, and I guess 14 the only point that I'd make is just taking the common law -- 15 THE COURT: I take it you can -- 16 MR. STERN: -- doesn't work. 17 THE COURT: I think the presiding judge would let 18 you sit down at this point. You can think about that for 19 rebuttal. 20 THE COURT: Take the hint. 21 MR. STERN: Thank you. 22 ORAL ARGUMENT BY DENNIS M. GINGOLD, ESQ. 23 ON BEHALF OF THE APPELLEES 24 MR. GINGOLD: May it please the Court, my name is 25 Dennis Gingold representing the plaintiffs in this litigation, JAD 30 1 and Your Honor we are the appellees, we are not the 2 petitioners. 3 This -- 4 THE COURT: I'm sorry, did I use the term 5 petitioner? 6 MR. GINGOLD: Yes, you did, Your Honor. 7 THE COURT: You mean suggesting, therefore, an APA 8 relationship and you wish to make that clear from the start 9 there's no APA relationship; this is a trust matter? Forgive 10 me, my use of the term !Ipetitioner!I comes out of habit, not 11 out of malice. 12 MR. GINGOLD: That's right, Your Honor, and 13 traditionally Indians lose, so usually they are the 14 petitioners. 15 THE COURT: I beg your pardon? 16 MR. GINGOLD: Usually Indians lose in the trial 17 court, which is why they are the petitioners in this circuit. 18 Your Honor, we -- 19 THE COURT: Usually Indians lose in the trial court? 20 Are you -- what kind of argument is that, counsel? 21 MR. GINGOLD: Your Honor, historically this is an 22 important case. Historically -- 23 THE COURT: And we're to take your argument 24 seriously now that the problem in this case is Indians usually 25 lose in the trial court? JAD 31 1 MR. GINGOLD: No, I was explaining why Indians are 2 usually referred to as petitioners. 3 THE COURT: Petitioners is not a pejorative. 4 MR. GINGOLD: No, I didn't think it was. I was just 5 correcting the -- 6 THE COURT: Well, I take your correction in the 7 spirit in which it was offered. 8 MR. GINGOLD: Thank you very much, Your Honor. It 9 was intended just as a correction. But, thank you. 10 Your Honor has identified the tension between Cobell VI 11 and Cobell XII, Cobell XIII to a certain extent and, indeed, 12 Cobell XVII. And that is a tension that the appellees have 13 identified in their briefs. It is a tension that has existed 14 from the beginning of this case, although we felt it was 15 settled in Cobell VI. We felt Cobell VI accurately described 16 the duties of the Secretary as a trustee delegate as fiduciary 17 duties and as fiduciary duties, they are to be measured with 18 more scrutiny and subject to the more stringent standards of a 19 fiduciary. Not merely as a secretary discharging her duties 20 as an administrator or as the Court in Cobell VI explained, 21 donning the mantle of an administrator, but to contend that 22 the secretary is entitled to deference and expertise -- 23 THE COURT: Your position is Cobell XIII and Cobell 24 XVII were inconsistent with prior cases, is that correct? 25 MR. GINGOLD: Cobell XVII, in our opinion, is in JAD 32 1 conflict with Cobell VI and Cobell XII. We believe Cobell 2 XIII can be read consistently, although there are some 3 inconsistencies in Cobell -- 4 THE COURT: So then why didn't you file a petition 5 for rehearing? A suggestion en banc -- 6 MR. GINGOLD: Your Honor -- 7 THE COURT: Because, as the government points out, 8 you let that go by. 9 MR. GINGOLD: Your Honor, our understanding of the 10 first in time rule in this circuit, and in every other circuit 11 but the Eighth Circuit, is that the first in time rulings 12 prevail and it's the subsequent rulings that are questionable 13 with regard to their validity if they are not reconcilable 14 with the earlier rulings. Therefore, it would be incumbent 15 upon the government, not the trust beneficiaries, to seek en 16 banc review and they did not do so. 17 THE COURT: Well, you're talking about 12 and 13 18 being inconsistent -- 19 MR. GINGOLD: No -- 20 THE COURT: -- essentially. 21 MR. GINGOLD: No, Your Honor. We believe 12 is 22 entirely consistent with Cobell VI and -- 23 THE COURT: No, no, no -- XIII is inconsistent with 24 XII. 25 MR. GINGOLD: No, we believe the holding in 13 is JAD 33 1 not inconsistent because -- 2 THE COURT: Well, the language is. 3 MR. GINGOLD: There is some language that is 4 inconsistent. 5 THE COURT: I thought you were -- 6 THE COURT: When you say -- you know, actually when 7 you talk about first in time, XII and XIII were issued exactly 8 the same time, exactly the same month. 9 MR. GINGOLD: Your Honor, if I may? Cobell XII was 10 issued on December 3! and Cobell XIII was issued on December 11 10th. 12 THE COURT: You're making a distinction between the 13 seven days? 14 MR. GINGOLD: Well, we have not seen in any of the 15 cases we reviewed on first in time whether the distinction is 16 one day or one year, first in time prevails. We have not seen 17 that -- 18 THE COURT: Well, we were issuing them at the same 19 time. They were circulating so the judges must have thought 20 they were consistent. 21 MR. GINGOLD: Your Honor, I do not speak to what the 22 judges were thinking -- 23 THE COURT: Yes, I noticed. 24 THE COURT: Let me ask you this about your argument 25 about -- maybe the reason why -- maybe the reason why 17 is JAD 34 1 different from Cobell VI and XII is they dealt with different 2 things. Cobell VI and XII dealt with the Interior 3 Department's trust responsibility; something on which the 4 courts don't defer, whereas Cobell XVII dealt with a remedial 5 issue on which we do defer. So, maybe there isn't really 6 anything inconsistent about them at all; just that they were 7 dealing with different things. 8 MR. GINGOLD: Your Honor -- 9 THE COURT: What do you think of that? 10 MR. GINGOLD: I think it's an interesting argument, 11 Your Honor, but that's not what -- 12 THE COURT: I wasn't making an argument. I was 13 asking you whether maybe these decisions aren't as 14 inconsistent as you think they are -- 15 MR. GINGOLD: Your Honor -- 16 THE COURT: -- because XVII is dealing with a 17 different kind of animal that VI and XII. That's all. 18 MR. GINGOLD: Your Honor, the accounting duty -- 19 THE COURT: Huh? 20 MR. GINGOLD: The accounting duty is a fundamental 21 trust duty. 22 THE COURT: It is a duty, but the question in 17 was 23 the remedy or the duty. The remedy for the violation. 24 MR. GINGOLD: That's correct. 25 THE COURT: Okay. So, you acknowledge, don't you, JAD 35 1 that our deference would be dramatically different in those 2 two situations? 3 MR. GINGOLD: Your Honor, I think the case in 17 4 turned on the details that were dictated to the secretary in 5 order for her to achieve compliance with the clear trust duty, 6 and those details were included in the structural injunction. 7 No such details were included in the October 20, 2005 8 injunction. Indeed, in accordance with the remand 9 instructions of the Cobell Court -- of the Cobell XII Court, 10 the judge was careful not to detail either the standards or 11 the methods the secretary should achieve compliance, whereas 12 in XVII that's exactly what the judge did and this Court found 13 problems with. 14 I think -- 15 THE COURT: Let me go back to the basic arguments 16 the government makes; the first of which is that there is no 17 showing in this entire massive proceeding in the District 18 Court -- the government I think implicitly takes the position 19 this is a sideshow anyway. Then this massive proceeding down 20 in the District Court to look into the security of the 21 computer systems. There is no showing that anyone ever 22 penetrated the trust accounts -- individual trust accounts 23 either internally or externally in such a fashion as to cause 24 any harm. True? 25 MR. GINGOLD: No, that's false, Your Honor. JAD 36 1 THE COURT: False. 2 MR. GINGOLD: That's correct. 3 THE COURT: Who did? 4 MR. GINGOLD: Let me explain. Plaintiff's 246 is 5 found at JA-9358. That is a -- an e-mail and attached to it 6 is a draft affidavit that is dated August 8th, 2003. It is 7 from Mary Kendall Adler, who is the general counsel of the 8 Office of Inspector General and she is also the Deputy 9 Inspector General. 10 THE COURT: And she was stealing money out of the 11 trust account? 12 MR. GINGOLD: No, she specifically identified in the 13 attached draft affidavit that was -- that section, among 14 others, were redlined prior to its finalization. But in this 15 exhibit, which is 246, she specifically said that there were 16 numerous instances of fraud and mishandling of trust funds and 17 over the previous two years, there were nine alone that had 18 been discovered. 19 THE COURT: I'm sorry? 20 MR. GINGOLD: Over the previous two years, that's 21 from 2001 to 2003, there were nine that were being 22 investigated. 23 THE COURT: And did the District Judge rely on that? 24 MR. GINGOLD: It's -- the District Judge did not 25 rely on that in his findings, but it is part of the record JAD 37 1 below -- 2 THE COURT: Well, wait a minute. If he doesn't rely 3 on it in his findings, it's not before us. 4 MR. GINGOLD: Your Honor -- 5 THE COURT: That's why I didn't know anything about 6 it. 7 MR. GINGOLD: Your Honor, there are several others, 8 iflmay? 9 THE COURT: Yes, well the question is did the 10 District Judge make any finding that anybody had penetrated 11 the trust accounts and diverted money or did other -- created 12 any other harm? 13 MR. GINGOLD: The District Judge's findings, based 14 on my understanding of his decision, Your Honor, is that the 15 funds and the data are in imminent risk of harm. He did not 16 spec -- 17 THE COURT: No, that's not my -- there may be a 18 difference in view as to whether there is a risk. Certainly 19 Judge Tatel's hypothetical of a shoebox is an interesting and 20 troubling one. But, the government's basic argument, as I 21 understand it, is that, look, there was no showing that 22 anybody penetrated and caused any difficulty and, therefore, 23 this draconian injunction is wholly inappropriate. 24 MR. GINGOLD: Your Honor, if I may, I don't think 25 that's what they said. I think they said there's no evidence JAD 38 1 in the record. I think that's what they said. 2 THE COURT: Well, look, we're reviewing the District 3 Court's opinion. 4 MR. GINGOLD: Your Honor, the District Court -- 5 THE COURT: We don't find facts on our own. So, if 6 the District Judge did not find as a fact that any -- there 7 had been any penetration of these accounts by any malign 8 agent. 9 MR. GINGOLD: The District Court did not make that 10 specific finding, Your Honor; I agree. 11 THE COURT: Well, why then should there be an 12 injunction? 13 MR. GINGOLD: Your Honor -- 14 THE COURT: Let alone this injunction which is quite 15 extraordinary. 16 MR. GINGOLD: Your Honor, if, in fact, all the trust 17 data has been corrupted and compromised -- 18 THE COURT: What is corrupted? 19 MR. GINGOLD: Corrupted means altered, modified, 20 deleted, or otherwise -- 21 THE COURT: Do you have any evidence of that? 22 MR. GINGOLD: Evidence of what, Your Honor? 23 THE COURT: That anybody corrupted the trust data by 24 penetrating the computers? 25 MR. GINGOLD: Yes, as a matter of fact in -- JAD 39 1 THE COURT: No, no, has the District Judge ever 2 found that? I shouldn't have asked that question. Once 3 again -- 4 MR. GINGOLD: The District Court did not make that 5 specific finding, but it is evidence of record, Your Honor. 6 THE COURT: Well, without that finding, I find that 7 injunction quite extraordinary. 8 MR. GINGOLD: No, Your Honor I was also not finished 9 answering the question. 10 THE COURT: Go ahead, counsel. 11 MR. GINGOLD: Thank you very much. 12 THE COURT: It's my pleasure. 13 MR. GINGOLD: If, in fact, the data was corrupted or 14 compromised or otherwise altered or modified by an 15 unauthorized person, and there was no audit trail or ability 16 to determine what has been done, who did it, when it was done, 17 which the Judge has found, Your Honor, because of the absence 18 of audit controls and other devices that are necessary to 19 insure that can be done, then any change in the data will be 20 irreparable harm to the trust beneficiaries. 21 It is important to understand this particular point. If, 22 in fact, all the data has been compromised, you don't need an 23 injunction, Your Honor. It's the bulldozer on the front lawn. 24 If the bulldozer already takes the house down, you don't need 25 an injunction because you're not going to order anyone to put JAD 40 1 the house back up. It's not going to work. The house has 2 been destroyed. 3 Same thing if the bulldozer is on the front lawn of this 4 courthouse. We have a situation for years, Your Honor. Since 5 1984 these systems have been open systems. The Judge -- the 6 District Court Judge carefully considered the impact of these 7 problems and did state explicitly that this is an open IT 8 architecture. The open IT architecture exposes critical trust 9 data and critical trust funds to the risks that we've 10 discussed. The Inspector General himself testified that he 11 had major concerns about the trust funds, in addition to the 12 record that has existed that the Chief of the Appellate 13 Section of the U.S. Attorney's Office, in another exhibit via 14 a memorandum that's included in the record -- it's Plaintiff's 15 247 -- specifically referenced testimony of a government 16 expert who testified under oath on June 11!, 2001 that there 17 was unauthorized access, open access to trust information, 18 files disappeared, changes were made, nobody would be able to 19 be able to identify what was done or when it was done. That 20 goes back, Your Honor, four year -- five years. 21 This problem with regard to the data has been a serious 22 problem in this litigation -- 23 THE COURT: But what impact does the most recent 24 opinion authorizing sampling have on this matter? 25 MR. GINGOLD: I beg your pardon? Could you please JAD 41 1 explain that question? The sampling? 2 THE COURT: Yes. In other words, it's not going to 3 be necessary in order to give an appropriate accounting, which 4 is after all what this lawsuit started out as. It's not going 5 to be necessary to insure every account is perfectly correct, 6 is it, if we're going to rely on sampling? 7 MR. GINGOLD: Your Honor, my reading of Cobell XVII 8 says that the Judge cannot rule out the possibility of using 9 statistical sampling to be able to discharge the duty that was 10 declared in Cobell VI. And the duty that was declared in 11 Cobell VI was an accounting of all funds and all items of the 12 trust. Cobell XIII and Cobell XVII in fact even discussed the 13 fact that plaintiffs would not be harmed by the absence of the 14 structural injunction because in the end, each trust 15 beneficiary needs to be paid whatever he is owed, including 16 imputed income and interest. Your Honor, if it is possible, 17 and that's all I believe Cobell XVII said -- if it is possible 18 to use statistical sampling to be able to identify all funds 19 and all items of the trust for each trust beneficiary, there's 20 no reason not to use statistical sampling. I believe that's 21 what Cobell XVII and XIII said. 22 The realities, Your Honor, that remains to be seen. 23 THE COURT: When we were faced in this litigation 24 constantly with a question of whether or not the methodology 25 of accounting, which was requested or ordered by the District JAD 42 1 Judge, far exceeded the cost -- far exceeded in cost the trust 2 corpus, which struck this Court as, to put it bluntly, 3 foolish. 4 MR. GINGOLD: May I respond, Your Honor? 5 THE COURT: Yes, please. 6 MR. GINGOLD: Your Honor, it does not even come 7 close to approaching the trust corpus, even if it's $13 8 billion. Your Honor, the trust corpus -- let me explain. 9 Thank you. 10 The trust corpus involves 11 million acres of land today. 11 It originally was 54 million acres of land. It involves all 12 the subsurface natural resources. That's oil, gas, timber. 13 We're dealing with aggregates. We're dealing with precious 14 metals. This is the trust corpus, Your Honor. 15 What you are talking about, I believe, is the annual 16 revenue that is reported coming from the trust corpus. The 17 question here, though, goes back to what Cobell VI said. And 18 Cobell VI said there must be an accounting for all items of 19 the trust and all funds. And the Court -- this Court 20 underscored all. It italicized all funds. The Cobell XVII 21 and Cobell XIII Courts said for each trust beneficiary. Not 22 for some. Not for those that are living today and not for 23 those who died 15 or 20 years ago, and not for those whose 24 accounts were only open on October 25th! 1994, which is what 25 the government argued. It's for all trust beneficiaries -- JAD 43 1 THE COURT: Well, we did react to the $13 billion 2 for the accounting. 3 MR. GINGOLD: Your Honor, we reacted that way, too, 4 if you'll recall. 5 THE COURT: Yes, I know. You came up and said that 6 injunction, we didn't even ask for. 7 MR. GINGOLD: That's correct. 8 THE COURT: Yes, which was sort of extraordinary. 9 MR. GINGOLD: Well, Your Honor, we have no desire to 10 see the United States Government waste $13 billion on an 11 accounting. Our position is that whether you're using the 12 narrow regulations, whether you're using Clear Column Federal 13 Computer Act, whether you're using the Federal Records Act or 14 any other statutory scheme independent of the Trust Reform 15 Act, the obligation is to insure the integrity of the data and 16 the assets held by the United States Government in its 17 systems. That's what every statutory scheme has said since 18 1987 to the present. That's what the regulatory schemes say 19 from 1987 to the present, including 0MB Circular A-130, 20 Appendix 3, and Your Honors, Appendix 3 deals with 21 interconnectivity specifically. 22 THE COURT: Can I ask you another conceptual 23 question which I put to counsel for the government? Our cases 24 are somewhat intentioned with respect to APA opinions like 25 Luhan and Utah. You've always argued those cases are JAD 44 1 irrelevant; this is a straight trust case. Although we have 2 also held that even in a straight trust case, it wouldn't make 3 sense to have some of the costs that the District Judge 4 imposed. You've pointed out there really is quite a 5 difference between the typical trust cast in which the 6 trustees will never expend funds to the detriment of the 7 beneficiaries, but here the funds spent by the government come 8 out of the general taxpayers revenue, whereas the 9 beneficiaries are a separate subclass, so that presents a 10 slight difference in some respects, and some have called it 11 distortion. 12 But, in any event, my point is we have cases which rely 13 on Utah and Luhan -- APA cases. We've said now three or four 14 times that APA is relevant. We've also said it's irrelevant. 15 You've pretty much argued all along it's irrelevant, but our 16 cases have said it's relevant. How do you square the circle? 17 How would you put them together? 18 MR. GINGOLD: Let me clarify if we have not been 19 clear enough, Your Honor. We believe there is a relevance to 20 the Administrative Procedure Act. We believe the relevancy 21 does not trump the fiduciary duties and the standards that are 22 applied as a trustee. We believe that's what Cobell VI and 23 Cobell XII -- 24 THE COURT: Yes, but how do you put them together? 25 MR. GINGOLD: Your Honor, I think you actually JAD 45 1 articulated very effectively during the government counsel's 2 argument. The Court has the authority to order the trust -- 3 the secretary acting as a trustee, acting as a trustee 4 delegate to discharge the trust duties and the Court has the 5 authority to determine whether or not the secretary has 6 accomplished that. 7 The Court doesn't have the authority based on what this 8 Court has said to dictate in detail what steps must be taken 9 for the secretary to bring herself into compliance. There is 10 tension. That tension can be reconciled if done properly. 11 One of the other major factors that is important in this 12 regard is what Cobell VI stated with regard to undue delay. 13 If there is undue delay, the Court can even go further. Undue 14 delay means justice denied. Consequently this Court, quite 15 intelligently and quite carefully in Cobell VI and XII 16 described the tension between the Administrative Procedure Act 17 and described the trust duty of the United States Government 18 which dates back with respect to individual Indians. This is 19 an important point. There's a difference between the 20 individual Indian trust and the tribal trust. But with 21 respect to individual Indians that dates back to 1887, because 22 in accordance with Mitchell II and with regard to White 23 Mountain Apache, the United States Government has exercised 24 control over the trust lands since that period of time and 25 with that exercise of control are the traditional trust duties JAD 46 1 and obligations unless Congress unequivocally stated to the 2 contrary. And, Your Honor, that hasn't been the case. 3 Indeed, in the Trust Reform Act of 1994 this Court 4 interpreted that literally to mean what Congress said. This 5 reaffirms the trust duty of the United States. It reaffirms 6 some of the obligations, including the need to be able to 7 reconcile balances, daily and annually. In order to do that, 8 you need accurate records. In order to do that, you need 9 adequate systems. In order to do that, you need adequate 10 staff -- 11 THE COURT: Let me ask you -- let me stop for 12 another point. The government points out that its 13 recordkeeping, its computer systems really are not -- compared 14 actually in recent terms, compare favorably with various other 15 government agencies, including the Defense Department. You 16 recognize you're not dealing with Chase Manhattan Bank -- 17 although it's no longer Chase Manhattan Bank -- whatever -- 18 MR. GINGOLD: Morgan, Your Honor. 19 THE COURT: Morgan, that's right with the latest 20 merger. You're dealing with the United States Government 21 which has, as you know, not the best record in the world 22 across the board on its ability to handle computers and, 23 indeed, any newspaper reader noticed that the FBI has had a 24 devilish time in the last 10 years trying to get its computer 25 system to operate appropriately, and indeed even to have the JAD 47 1 correct security for it. It's also true of the Defense 2 Department. You can't make a silk purse out of a sow's ear. 3 Isn't that fair? I mean, how can you ask -- you're basically 4 asking for the Interior Department's computer system to be 5 equivalent to Chase Bank, whereas what you want for Interior 6 something much better than the government provides even in the 7 areas of national defense. 8 MR. GINGOLD: Your Honor, what I'd like to say is as 9 follows. Trust duty is not dependent on the inability or the 10 incompetence of the trustee. The government is the trustee, 11 not the Department of Interior, and not the Department of the 12 Treasury. The entire United States Government, each branches 13 delegates include the Secretary of the Interior and the 14 Secretary of the Treasury. The trust is established and 15 rooted in statute and treaty. It is defined by common law and 16 trust law and trust principles -- 17 THE COURT: So, in other words it's your view that 18 the District Judge is perfectly entitled to ask for a much 19 better computer system than the Defense Department, the CIA, 20 and the FBI have? 21 MR. GINGOLD: Your Honor -- 22 THE COURT: Because there's this trust obligation -- 23 MR. GINGOLD: Yes. The answer is yes. The FBI is 24 not a fiduciary to individual Indian trust beneficiaries. The 25 property - this is real property. These are property rights JAD 48 1 that are protected by due process in this country. The FBI 2 doesn't have that property and the Defense Department -- 3 THE COURT: Well, they only have the obligation to 4 protect the United States against terrorist attacks and in 5 your view, that's much less important than the trust 6 obligation here? 7 MR. GINGOLD: No, Your Honor. If the United States 8 Government believes that's sufficient security for those 9 systems, the government has made that decision. The United 10 States Government hasn't made a decision with regard to the 11 trustee - trust beneficiaries here, that the trust 12 beneficiaries are entitled to the protections that any other 13 trust beneficiary is entitled to in this country. They have 14 not unequivocally stated that Indian trust beneficiaries are 15 not entitled to have their property rights protected like 16 anyone else does, and, Your Honor, the Indians didn't ask for 17 their property to be put in trust. It is in trust and that's 18 what we're dealing with. 19 Once you take someone's property in trust, you have an 20 obligation to protect it. There is 800 years of trust law, 21 including 200 years of trust law in this country that define 22 those standards in common law -- 23 THE COURT: When you refer to you, you're not 24 referring to me, are you? 25 MR. GINGOLD: No, Your Honor. JAD 49 1 THE COURT: Thank you. 2 THE COURT: Let me -- 3 THE COURT: Go ahead. 4 THE COURT: I want to pursue a couple of different 5 issues. Well, they're related to Judge Silverman's first line 6 of questioning. Would you agree that in fashioning the 7 injunction here the District Court had an obligation to 8 balance the harm he found to the Indian's interests against 9 the effect of the remedy on the Interior Department? 10 MR. GINGOLD: Yes, I would, Your Honor. 11 THE COURT: You agree with that. 12 MR. GINGOLD: Yes, sir. 13 THE COURT: Where in this opinion would I find him 14 doing that? 15 MR. GINGOLD: I think throughout the opinion, 16 including the Judge's decision to exclude from the scope of 17 the order any system that affects the health, welfare, 18 property of anyone in this country or the national security of 19 this country -- and, by the way, the Court explicitly 20 discussed the fire suppression responsibilities of the 21 Interior Department. The Court explicitly excluded those 22 systems. 23 THE COURT: Okay, anything beyond that? 24 MR. GINGOLD: Yes, Your Honor. The Court did a 25 balancing and talked about the fact that there is irreparable JAD 50 1 harm to the trust beneficiaries as he's found it based on the 2 59-day record of proceeding -- 3 THE COURT: Right. 4 MR. GINGOLD: -- and he -- he was left with a 5 problem, Your Honor, because the government put on no evidence 6 during the 59-day trial of harm of consequences as a result of 7 a disconnection. This was an important point, and you may 8 recall it was raised in the briefs that the government filed 9 with regard to the stay that has been imposed by this Court on 10 the injunction. 11 What we have here is a situation where the government is 12 now stating in a declaration what was not stated during the 13 59-day proceeding that a variety of different problems and 14 harms would result, and there is some strong language that 15 described this. The reality is, Your Honor, that was not put 16 forth by the government during the proceeding. 17 The government initially argued that they were caught by 18 surprise that plaintiffs were seeking a disconnection. They 19 thought they were dealing solely with -- 20 THE COURT: Your point then is that -- are you now 21 saying to me that the government before the District Court 22 never argued that a disconnect injunction would adversely 23 affect the Interior Department? 24 MR. GINGOLD: They did argue that, Your Honor -- 25 THE COURT: Okay. JAD 51 1 MR. GINGOLD: -- but they did not say it would cause 2 irreparable harm or a catastrophic situation. 3 THE COURT: For example -- I mean, the District 4 Court found -- the District Court didn't condemn all of the 5 Interior's computer systems. It found, for example, that some 6 of the bureaus like MMS and DIA had fairly good protection 7 from intrusion, right? So, why were they in -- why were they 8 disconnected? 9 MR. GINGOLD: I couldn't hear that last part, Your 10 Honor? 11 THE COURT: Why were those two agencies 12 disconnected? 13 MR. GINGOLD: Those two agencies were disconnected 14 originally on December 5th! 2001 and then they continued 15 disconnected -- 16 THE COURT: I know, but I'm not asking you whether 17 they -- I know they were, but the District Court found that 18 they had fairly good protection against intrusion. 19 MR. GINGOLD: They had extremely good connection 20 against intrusion from the internet because they had 21 disconnected. That's what the Court said. 22 And, Your Honor, with respect to the irreparable -- the 23 balance of harms the Court did specifically discuss the 24 balance of harms beginning at page 274 of the opinion where he 25 starts in category (iii), balance of harms, and he went JAD 52 1 through a fairly detailed analysis, including describing the 2 public interests that could be affected by what your concerns 3 are. So, the Court did, Your Honor -- 4 THE COURT: Let me ask you a question then about the 5 definition of IITD. 6 MR. GINGOLD: Yes, sir. 7 THE COURT: Is it your understanding that this 8 definition is limited to confidential information? Is it 9 supposed to be? 10 MR. GINGOLD: Your Honor, it's -- is it limited to 11 confidential information? 12 THE COURT: Yeah, confidential trust information. 13 MR. GINGOLD: Your Honor, I believe it is limited to 14 confidential trust information because I believe what the 15 Court says in the defined term, it is based on the information 16 that the government relies on in discharging its trust duties. 17 That's what the -- that's also part of the definition of 18 individual Indian trust data in the injunction. And this 19 definition of trust data actually was -- 20 THE COURT: Do you have the definition in front of 21 you there? 22 MR. GINGOLD: I do not have the definition -- 23 THE COURT: Well, it says -- it says anything that 24 refers to directly -- anything that refers to directly or 25 indirectly and generally or specifically a federal record -- JAD 53 1 affects the existence of individual Indian trust assets. And 2 then under 5(a) it says which was created for or by Interior 3 in connection with management of Indian -- individual Indian 4 trust information. 5 So, there's nothing in there that refers to -- in fact, 6 that language could cover the government's brief in this case. 7 MR. GINGOLD: I beg your pardon? 8 THE COURT: I said that language could cover the 9 government's brief in this case. 10 MR. GINGOLD: Your Honor, this is the language that 11 the -- that is almost identical to the language used by the 12 government in the December 17, 2001 consent order. This 13 carries over from that period of time. 14 THE COURT: The government argues that this 15 injunction is too broad, and I'm asking you whether this 16 definition standard is to confidential information, because as 17 I read it, it's much broader. 18 MR. GINGOLD: No. It's related, as I understand it, 19 to the information necessary and relied on by the United 20 States Government to discharge its trust duties to individual 21 Indian trust beneficiaries. If, Your Honor, some of that 22 information happens to be public, notwithstanding the Privacy 23 Act issues, then, in fact, it's covered. If, in fact, there 24 are not Privacy Act issues, then that information could be 25 public. JAD 54 1 If you're dealing with confidential financial 2 information, you're dealing with property of individuals and 3 -- even of those properties, Your Honor that should be 4 confidential information. I'm not sure what information that 5 the United States Government relies on to discharge the trust 6 duties of the United -- that the Interior relies on to 7 discharge the trust duties of the United States -- 8 THE COURT: So (indiscernible) -- individual data? 9 MR. GINGOLD: Your Honor, if you read on with regard 10 to 5(a) -- 11 THE COURT: -- 5(a) -- 12 MR. GINGOLD: That's right. 13 THE COURT: -- (indiscernible) in connection with 14 the management of individual Indian trust assets. 15 MR. GINGOLD: That's correct -- 16 THE COURT: That's the government's brief. 17 MR. GINGOLD: That's the standard. Whatever is -- 18 THE COURT: But that would cover the government's 19 brief. 20 MR. GINGOLD: Your Honor -- 21 THE COURT: There's nothing in this thing that says 22 it's limited to confidential information. 23 MR. GINGOLD: Your Honor, we're not aware of trust 24 information which is -- involves the -- which is financial and 25 which involves the property rights of individual which is not JAD 55 1 confidential information and we haven't -- and nothing was 2 presented during the 59-day hearing which indicated that any 3 of the information that the government was relying on is not 4 confidential. Indeed, that's why so many of the -- of 5 documents and so much of the transcript testimony is under 6 seal. 7 THE COURT: If -- one last question. If we 8 disagreed with your view about the adequacy of the District 9 Court's findings here and thought this injunction was too 10 broad, what -- what elements of it are most important to 11 preserve with respect to your interests? 12 MR. GINGOLD: It's a difficult question. I'll try 13 and give you an intelligent answer. The -- because of the -- 14 THE COURT: In other words, my hypothetical -- my 15 question is we can't have an Interior-wide injunction. Assume 16 that we -- let's say that's what we do think. I'm just asking 17 you hypothetically. Assume we think it's too broad. What 18 elements of this are critical protecting your clients' 19 interests? 20 MR. GINGOLD: I think the BIA and OST disconnected. 21 Bureau of Indian Affairs and Office of Special Trustee 22 disconnections are critical to be included. 23 THE COURT: Is that because that's where most of the 24 trust data is? 25 MR. GINGOLD: No, unfortunately that's not where JAD 56 1 most of it is, Your Honor. As the government has recently 2 disclosed, it's suffused throughout the department. 3 THE COURT: So, why did you pick those two agencies? 4 MR. GINGOLD: Well, I'm starting with those two 5 agencies, if I may -- 6 THE COURT: Okay. 7 MR. GINGOLD: -- because as far as I know, that's 8 all they have. I don't think they have any other data or 9 information other than trust information, so I'm trying to 10 start with the low-lying fruit, if I may? 11 THE COURT: Mm-hmm. 12 MR. GINGOLD: Second, I would say that MMS 13 contractors, such as Excenture and USI Network, which house 14 all the oil and gas royalty information generated for MMS, 15 that must be included, unless the contractors -- 0MB -- 3130, 16 Appendix 3, that FISMA, that NARA, that -- identifies are also 17 disconnected, then there will never be any possibility of 18 protection for the trust beneficiaries because there has never 19 even been an analysis independently performed by the 20 government. Notwithstanding a 2000 opinion from the 21 solicitor, notwithstanding a 2004 opinion from the assistant 22 general counsel -- or, associate general counsel of the Office 23 of Inspector General, notwithstanding admonitions from 0MB, 24 they have never been addressed. 25 That also includes the tribes, Your Honor. Indian tribes JAD 57 1 -- there are approximately 100 tribes by compact, contract, or 2 cooperative agreement that with the Department of Interior 3 that administer trust assets on behalf of the United States 4 Government. There are -- organization that is required to 5 protect the data the same way any contractor and the United 6 States Government is to protect the data. The response to 7 Hord Tipton, the ClO, in an e-mail as to why they did not -- 8 and this is part of the record of these proceedings as well -- 9 did not protect the data in the tribal systems is because if 10 they had to discharge that responsibility would be a nightmare 11 for the Department of Interior. 12 This is not a delegable function. The trust duty of the 13 United States is a government duty to the trust beneficiaries. 14 It cannot be delegated and diminished through a compact 15 contractor (indiscernible) 16 Your Honor, as far as we know the only data that's held 17 by the tribes in the administration of the individual Indian 18 trust pursuant to contract, compact, and cooperative agreement 19 is individual Indian trust data. They, too, should be 20 disconnected in accordance with statute, regulation and this 21 Court's orders with regard to the protection of trust data 22 wherever it is. These are government records. This is 23 individual Indian trust data. These are assets of the trust. 24 Under White Mountain Apache, the United States Government may 25 not allow the trust assets to fall into ruin on the watch of JAD 58 1 any particular Interior Secretary. That was the 2003 opinion 2 of the Supreme Court. 3 THE COURT: Thank you. Your time is way over. 4 MR. GINGOLD: Thank you. 5 THE COURT: Mr. Stern, your time is up, but you can 6 take two minutes, including to answer Judge -- question. 7 THE COURT: It seems there are two questions you 8 should answer in two minutes. One is my conceptual question 9 and secondly, you should focus hard on Judge Tatel's concern 10 that you have not challenged as any finding of fact to the 11 effect that there's irreparable -- that there is a danger of 12 irreparable harm -- a risk of irreparable harm. 13 ORAL ARGUMENT OF MARK B. STERN, ESQ. 14 ON BEHALF OF THE APPELLANTS 15 MR. STERN: Well, let me sort of try to make a 16 couple points which I think respond to these. Let me say that 17 the government doesn't dispute the existence of a duty to 18 preserve trust records. However, what would follow from that 19 is, if plaintiff wanted to proceed on that point, they would 20 need to show that either there was harm or imminent harm, or 21 that the government was failing to comply with standards that 22 would apply to a tribal trustee or some kind of trustee. 23 There's no showing of that at all, much less that this form of 24 injunctive relief would issue in any similar way -- 25 THE COURT: Is it really true that it's a finding of JAD 59 1 fact? 2 MR. STERN: Your Honor, our entire brief is the 3 motive to showing -- 4 THE COURT: No, no counsel. Should you assume the 5 correctness of my esteemed colleague's statement that the 6 question of whether there is a risk of irreparable harm is a 7 finding of fact? 8 MR. STERN: Your Honor, I don't think that the 9 overall conclusion, you know, is a finding of fact. I think 10 that when there are subsidiary findings of fact that -- and 11 those subsidiary facts don't add up to the conclusion, but if 12 the conclusion were thought to be a finding contrary to our 13 view, that it would be clearly erroneous. We haven't used the 14 word clearly erroneous, but it would be under any standard it 15 doesn't -- this record does not support that conclusion. 16 And there's discussion about the role of the APA and sort 17 of remediation and so forth. Leaving aside sort of, you know, 18 our view that there's been no demonstration of entitlement to 19 an injunction, no showing of a failure to comply with the duty 20 that would be visited on a private trustee in any 21 circumstance -- 22 THE COURT: Well, where did that come from? Excuse 23 me, where did that -- I haven't heard that argument before. 24 So -- 25 MR. STERN: It's in our brief. JAD 60 1 THE COURT: So, going back to my hypothetical again 2 with my box on the street. I'd have to have evidence that 3 other trustees didn't do that? 4 MR. STERN: Well, Your Honor, here the showing would 5 be-- 6 THE COURT: Isn't it simply a question of imminent 7 risk? 8 MR. STERN: Well, first of all there is no showing 9 of imminent risk. But look -- 10 THE COURT: The District Court has found that -- 11 THE COURT: Is that a finding of fact? 12 THE COURT: The District Court has made -- the 13 District Court has made that finding. 14 MR. STERN: Your Honor -- 15 THE COURT: It hasn't? 16 MR. STERN: Your Honor, as I just said, if that is a 17 finding, it is clearly erroneous. We think it's a conclusion 18 and the subsidiary findings do not support it. But under any 19 standard, it is wrong. We would -- there is an other ground 20 you could say, look it doesn't matter -- and this is going 21 back to your first question which I understood to be your 22 hypothetical about the box which says, look, if we were doing 23 something that any private trustee would know, whether or not 24 there would actually be an irreparable harm or an imminent 25 threat, you can just know no private trustee is allowed to do JAD 61 1 this. 2 THE COURT: Why isn't it enough to say private 3 trustees don't keep trust data on unsecured computers? 4 MR. STERN: Because there is no showing that the 5 computers are not secured. Everybody acknowledges that the 6 computers are secure in the sense that we've got -- 7 THE COURT: Isn't there a question of the extent to 8 which they're secure -- 9 MR. STERN: That's right, and there is no argument 10 -- I mean, Judge Silverman says, well, you can't expect the 11 government to do what, you know, sort of Morgan Stanley or 12 whoever might do. There's no showing that what you would get 13 with Morgan Stanley would be better. I mean, this is -- 14 there's nothing like that in here. 15 Yeah, plaintiffs come in and they go, look, there are 16 various problems. Now, of course the District Court says have 17 you made progress? Absolutely substantial progress. Laudable 18 progress. The IG reports say monumental change. Both the 19 2003 and the 2004 reports, which are the only ones that were 20 in there in that trial say that. There's no doubt, $100 21 million spent on that in three years. The testimony from the 22 IG contractors about the defenses that were -- and the double 23 and triple layers of security are quite remarkable so to refer 24 to these as an unsecure system, there's no way -- there's 25 nothing in this record that would suggest -- JAD 62 1 THE COURT: I just want to get that one -- want you 2 to focus on the conceptual issue; the interrelationship 3 between the trust duty and APA and how we should look at that 4 going forward given the tension in our cases? 5 MR. STERN: Well, I think that the question -- I 6 think what Your Honor said before is really key that the role 7 of the Court -- 8 THE COURT: You both have said that. I wish I 9 understood what I said. 10 MR. STERN: Well, what I understood this Court to be 11 saying is -- again, we don't dispute the duty to maintain a 12 trust record and let's just suppose, you know, for, you know, 13 argument sake, obviously from my point of view that there was 14 some showing of a violation of a duty here. At that point, 15 you would then have sort of the logic of the last -- 16 injunction opinion which you had a finding that the government 17 needed to do an accounting. That was the premise. 18 And what the Court said is, look, just because it 19 involves fiduciary duties, the Court can't come in and treat 20 this as its domain and displace the agency as the principle 21 person for working out compliance with a broad statutory 22 mandate. And let's understand that what's been done here -- 23 first of all, there are huge numbers of systems that would 24 come offline and the way they come back online is that you 25 have to write plans not based on any particular standard -- JAD 63 1 not a FISMA standard, not an Interior standard, but some new 2 standard, which then is subject each and every one of these is 3 subject to discovery, further litigation proceedings, and then 4 the Court could decide whether it likes part of the plan, all 5 of the plan, and all the further relief. That's all in the 6 order. This is not my imagination. This is the way this is 7 really supposed to work. 8 THE COURT: Thank you, Mr. Stern. 9 MR. STERN: Thank you. 10 THE COURT: Your time is up. Let's move on to the 11 next. 12 (Recess.) 13 14 15 16 17 18 19 20 21 22 23 24 25 CERTIFICATE I certify that the foregoing is a correct transcription of the electronic sound recording of the proceedings in the above-entitled matter. Judith A. Downey Date DEPOSITION SERVICES, INC.