By Andrew Westney

Law360 (April 24, 2020, 9:00 PM EDT) -- A D.C. federal judge said Friday he would be "stunned" if the Treasury Department took the position that Alaska Native Corporations could receive a large chunk of $8 billion in COVID-19 funding for tribal governments, and seemed concerned that tribes might lose the chance to challenge such a distribution.

At a hearing Friday afternoon, U.S. District Judge Amit P. Mehta asked the government's attorney what plans Treasury Secretary Steven Mnuchin had to divvy up $8 billion in direct tribal funding in the $2 trillion Coronavirus Aid, Relief and Economic Security Act and whether the ANCs — which a group of federally recognized tribes say should get none of the money — might be owed a relatively small percentage compared to those tribes.

After Jason C. Lynch of the U.S. Department of Justice said that the Treasury Department was "still in the process of deciding the allocation amounts and methods," Judge Mehta wondered how data requested by the department might be used in its calculations.

"I don't think Congress intended, for example, 50 percent of these funds, $4 billion, to go to the ANCs. I would be stunned if the agency took the position … because ANCs hold a larger percentage of land relative to other Indian tribes," the judge said.

"If that's the allocation method that Treasury, the department, is going to take, that … to me would be unmoored from what Congress' intent would be," the judge said, adding that the limited circumstances under which ANCs may qualify as tribes under the ISDEAA — whose definition of "Indian tribe" the CARES Act adopts — "ought to also be reflected in the allocation of the CARES Act."

"I don't think the court should or can at this point consider the amount that is ultimately going to be allocated," Lynch responded, saying the Treasury Department's requests for information about tribes' land holdings when they applied for funding does not mean such information will be given a particular weight in calculating payments.

"I think what the court has to decide in this case is whether ANCs are eligible at all, and if there is an issue with the allotment, I think that would have to wait and be addressed as its own agency action," Lynch said.

But for the plaintiff tribes, "it seems to me once the allocation's made, they're out of luck," Judge Mehta said, and he asked Lynch if Treasury planned to publish its allocation formula and amounts before or after the money goes out.

Lynch said he didn't know when Treasury would publish that information, as it has said it will do.

Eleven federally recognized tribes, including the Confederated Tribes of the Chehalis Reservation, are seeking an injunction to prevent Mnuchin from sending any of the $8 billion to the for-profit ANCs. They say the money should be divided among the 574 federally recognized tribes, including over 200 in Alaska.

Mnuchin urged the court in a brief Thursday to deny the injunction request, saying that the ANCs qualify as "Indian tribes" under decades of case law regarding the Indian Self-Determination and Education Assistance Act.

In their reply brief filed before Friday's hearing, counsel for the tribes argued that the CARES Act plainly does not extend funding to ANCs because — referring to language common to the ISDEAA and the CARES Act — they are not "recognized as eligible" for federal programs provided "to Indians because of their status as Indians."

Mnuchin "asks the court to eliminate this eligibility requirement, as applied to ANCs, from the definition entirely," which "would take this court far beyond the judicial role, as the Secretary's reading fails under any plausible construction of the text," according to the brief.

During Friday's hearing by teleconference, Judge Mehta asked why Congress chose a definition that mentioned ANCs if it intended to exclude them from funding altogether, and suggested that the corporations might deserve to be eligible for funding to the extent they are providing public services to help Alaska Natives fight the COVID-19 pandemic.

Riyaz Kanji of Kanji & Katzen PLLC, which represents the plaintiff tribes, answered that "there's a mechanism to do that," by allowing federal recognized Alaska tribes to contract with ANCs or tribal health consortia for services using the federal funding.

Nicole E. Duchenaux of Big Fire Law & Policy Group LLP, an enrolled member of the Cheyenne River Sioux Tribe who represents her tribe, the Rosebud Sioux Tribe and Oglala Sioux Tribe in a consolidated suit, also took a firm stance against any of the funding going to the ANCs.

Being "recognized" has a meaning in federal Indian law "that does not apply to entities that aren't controlled by, owned by, directed by federally recognized tribes," Duchenaux said.

And Kanji said that if the Treasury does decide to send a large share of the money to ANCs, there would be "really no ability for tribal governments to then challenge that disbursement or to really recoup any of that money."

The Treasury has said that it won't start delivering the money until Tuesday at the earliest — missing a Sunday deadline — and the DOJ's Lynch told the judge that is still the plan.

The tribes are represented by Riyaz Kanji and Cory J. Albright of Kanji & Katzen PLLC; Harold Chesnin of the Confederated Tribes of the Chehalis Reservation; and Lisa Koop Gunn of the Tulalip Tribes.

Mnuchin 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, Federal Programs Branch.

The case is Confederated Tribes of the Chehalis Reservation v. Mnuchin, case number 1:20-cv-01002, in the U.S. District Court for the District of Columbia.

--Additional reporting by Stephen Cooper and Andrew Kragie. Editing by Peter Rozovsky.

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