By Andrew Westney

Law360 (June 16, 2020, 4:14 PM EDT) -- A D.C. federal judge on Monday ordered the U.S. Department of the Treasury to pay out virtually all that's left of $8 billion in COVID-19 relief funds to tribal governments, saying the department's intention to hold back $679 million as a hedge against losing a suit over the funds "simply cannot be justified."

U.S. District Judge Amit P. Mehta said in an opinion Monday that the Agua Caliente Band of Cahuilla Indians and other tribes had waited "long enough" to receive their share of the funding, having seen money that was supposed to be distributed within 30 days under the Coronavirus Aid, Relief and Economic Security, or CARES, Act still not delivered after some 80 days.

While the judge on May 11 denied the tribes' initial bid to force the entirety of the funds to be sent out, "continued delay in the face of an exceptional public health crisis is no longer acceptable," the judge said Monday.

"It is not clear what authority" U.S. Secretary of the Treasury Steven Mnuchin could have to withhold $679 million in case the Treasury Department loses in a separate suit against the Prairie Band Potawatomi Nation's claims that the tribe was shortchanged when Treasury sent out an initial $4.8 billion of the CARES Act funds in early May, the judge said.

Having decided how he wants to distribute all of the money, Mnuchin's "obligation now is to distribute those funds," and "the CARES Act does not grant him the discretion to do otherwise," according to the opinion.

However, Judge Mehta said Mnuchin could withhold the $7.65 million the Prairie Band Potawatomi Nation claims it was underpaid, but only if the tribe decides to seek expedited D.C. Circuit review of its appeal of the judge's recent order denying the tribe's bid to block any more of the funds from being distributed.

The Agua Caliente complaint filed in early May sought to force the Treasury Department to immediately allocate the full $8 billion the government owes tribes to fight the COVID-19 pandemic, after the department failed to meet the April 26 deadline to do so under the CARES Act.

Judge Mehta denied the initial injunction bid on May 11 on the basis that the department's delay was not yet egregious enough to warrant an injunction.

The government later that month distributed the first $4.8 billion tranche of funds, based on tribal population information. Last week, the tribes moved again for the allocation of the remaining $3.2 billion, which the government said would be distributed based on additional tribal employment and expenditure data that each tribe would be required to submit to the department.

On Friday, the department informed the court that all but $679 million had been allocated. The department said it was withholding roughly 8.5% of the $8 billion to resolve any potentially adverse decision in the complaint the Prairie Band Potawatomi Nation filed earlier this month.

The government decided to withhold the money even though Judge Mehta the day before had rejected the Prairie Band Potawatomi Nation's bid to stop any more funds from being distributed while the tribe challenges Treasury's population metric used for the first payout, which the tribe said caused it to be underpaid by $7.65 million.

According to the department, the $679 million figure "represents an estimate of the difference in total payment amounts to tribal governments if Treasury had made population-based payments based on tribal enrollment data provided by the Bureau of Indian Affairs, rather than the census-based Indian Housing Block Grant data used for the first distribution as announced on May 5, 2020." The department acknowledged it is not required to maintain this reserve but described it as "a prudent course at this stage."

According to the Potawatomi, the government should have allocated funds according to tribal enrollment data but instead wrongly based its decision on the number of people who selected "American Indian or Alaska Native" on their census form in a given geographic area.

Judge Mehta ruled that he didn't have jurisdiction to hear the Potawatomi tribe's challenge to Treasury's plan to distribute the funds, saying the CARES Act "does not require the secretary to even consider population data, let alone population data of a particular kind."

In his opinion Monday, Judge Mehta said Treasury's lengthy delay was the most important factor in deciding that the department should distribute the remaining funds, including the $679 million it had sought to withhold.

Mnuchin's distribution of the first $4.8 billion in funding is not "at genuine risk of being overturned or modified through litigation," the judge said, since "the court already has held that the Supreme Court and circuit precedent squarely foreclose judicial review of the Prairie Band Potawatomi Nation's challenge to the secretary's discretionary choice of the population data he used to allocate the first tranche of CARES Act funds."

In addition, the amount Mnuchin held back "far exceeds the amount at stake in the Prairie Band matter," and "the secretary's injection of further delay into processing the remaining Title V payments is grossly disproportionate to the litigation exposure he fears."

The Prairie Band Potawatomi suit could take months to resolve, and keeping the $679 million on hand "only invites other dissatisfied Indian tribes to bring their own challenges to the secretary's allocation decisions," the judge said.

"More litigation will only lead to more delay — a result that the court cannot countenance in the face of a pandemic," according to the opinion.

Counsel for the parties did not immediately respond to request for comment Tuesday.

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

The Treasury Department is represented by Joseph H. Hunt, Eric Womack and Jason C. Lynch of the U.S. Department of Justice's Civil Division.

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

--Additional reporting by Kelly Zegers, Emma Whitford and Khorri Atkinson. Editing by Stephen Berg.

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