By Andrew Westney

Law360 (June 3, 2020, 9:21 PM EDT) -- The Treasury Department expects to take an additional week past its planned date to begin sending $3.2 billion in COVID-19-related funding to tribal governments, telling a D.C. federal judge Wednesday it needs the extra time because hundreds of tribes have not submitted the right data to receive the much-delayed money.

A U.S. Department of Justice attorney representing Treasury Secretary Steven Mnuchin said during a teleconference that the department won't be able to meet its anticipated June 5 date to deliver the funds, and now plans on June 12 to start to distribute the remaining $3.2 billion of $8 billion in direct tribal government funding provided by the CARES Act. 

The DOJ's Jason C. Lynch told U.S. District Judge Amit P. Mehta that "several hundred submissions" from tribes were incomplete, and that any tribe that fails to fix those problems by Saturday "does risk not getting any data-based payment from the remaining 40 percent tranche" of the $8 billion in funding.

The government distributed $4.8 billion of the CARES Act funds in early May based on tribal population information, saying it would distribute the remaining $3.2 billion based on additional tribal employment and expenditure data that each tribe would be required to submit to the department.

After Judge Mehta denied a bid on May 11 by the Agua Caliente Band of Cahuilla Indians and other tribes to force the department to distribute the remaining money immediately, Treasury set the June 5 date to start sending out the $3.2 billion, nearly six weeks after the 30-day deadline to distribute all of the money under the law enacted March 27.

In a court filing Tuesday, Mnuchin counselor Daniel Kowalski said that 61 tribes had not submitted an application for funding by May 29, and that as of early afternoon on Tuesday, applications that were received from 336 tribes — well over half the 574 federally recognized tribes — had problems that the department planned to contact them to resolve.

"Because of the surprisingly large number of incomplete and/or inaccurate submissions, Treasury expects that the timeline of its allocation determination and payments will necessarily be moved back by approximately one week," Kowalski said in his declaration.

During Wednesday's hearing, Judge Mehta asked if Saturday, June 6, would be a "drop dead" date for tribes to provide satisfactory information to the Treasury department, as the DOJ's Lynch said the Treasury Department wanted to start crunching complete numbers from the tribes the following Monday.

Lynch confirmed that if tribes missed the June 6 deadline, which Treasury is expected to officially post on its website Thursday, they might not receive any of the "data-based payments" of the $3.2 billion, which would appear to mean any payment, since the department's current plan predicates all the distributions on tribal data.

The government's attorney said that a minor error in a tribe's application might still be correctable after Saturday, but that "truly incomplete" applications, such as those missing necessary documents, would leave those tribes ineligible for more funding.

Keith M. Harper of Kilpatrick Townsend & Stockton LLP, which represents the Agua Caliente and the other plaintiff tribes, said that the government had already taken about two-and-a-half times as long as the 30 days allowed under the CARES Act to distribute the tribal funds, and that he was "disappointed that the goalposts have been moved once again."

Despite the government's stated intention to distribute the remaining funds starting June 12, "without a commitment, that date could slip like it slipped before," he said.

Harper said that the tribes plan to again ask the court to force the government's hand, pointing to the judge's May 11 ruling initially denying an injunction as suggesting that the department is now taking long enough that the court would have to give more consideration to stepping in.

In that May 11 decision, Judge Mehta said the department's delay was not yet egregious enough to warrant an injunction, but "should the Secretary's delay verge on doubling the time Congress mandated to fully disburse Title V funds to tribal governments, then the question of egregiousness becomes a closer one than it is today."

Lynch disputed Harper's interpretation of that decision, saying that by "doubling," the judge had meant that if the delay past the deadline lasted two months beyond the initial month mandated by the CARES Act, which would be June 25, rather than May 26 as the tribes contend.

Judge Mehta did not clarify his meaning on that point during Wednesday's hearing.

In an order following the hearing, the judge said the tribes should file their new preliminary injunction motion by Friday, with the government to respond by June 10.

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

The Treasury Department is represented by Assistant Attorney General Joseph H. Hunt, Assistant Branch Director 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 and Emma Whitford. Editing by Peter Rozovsky.

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