Petition — Hackford v. First Security Bank of Utah, N.A.

Office - Suor ome Court, U.S.

FILED

%2-2078 jUN 1% 1983

SLEXSNDER L. STEVAS,

CLERK

NE or re

IN THE

Supreme Court of the United States

OCTOBER TERM 1982

RANDOLPH C. HACKFORD, LAWANNA KAY,

REED THOMPSON, ALLEN D. REYOS

AND ORANNA BUMGARNER MOOSMAN,

FOR THEMSELVES AND FOR

AND ON BEHALF OF ALL OTHER

PERSONS SIMILARLY SITUATED,

PETITIONERS,

7:

FIRST SECURITY BANK OF UTAH, N.A.,

DEFENDANT.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

Attorneys for Petitioners

Parker M. Nielson Adam M. Duncan

655 South 200 East 926 Kennecott Building

P. O. Box 510917 Salt Lake City, Utah 84133

Salt Lake City, Utah 84151 (801) 363-5873

(801) 532-1150

John J. Flynn

Paul T. Moxley Of Counsel

318 Kearns Building 954 Military Drive

Salt Lake City, Utah 84101 Salt Lake City, Utah 84103

(801) 355-5815 (801) 581-6679

JUNE 19, 1983

QUESTIONS PRESENTED FOR REVIEW

1. If Congress substitutes a bank in the historic Consti-

tutional role of the United States as a guardian and trustee

of Indians and their property, may it be implied that the

commercial trustee is shielded from trust liability to the

Indian beneficiaries by any incidents of the “sovereign im-

munity” doctrine?

2. Whether protections created by an Act of Congress

for “members” of a particular Indian tribe may be ignored

by the trustee, or changed by administrative interpretations

of the Bureau of Indian Affairs so that they apply to the

“Tribe”? and not to its “members,” and be exempt from

judicial review?

3. May protections under federal securities laws for se-

eurities holders in general and American Indians and their

property in particular, confirmed by prior decisions of this

Court, be made subject to or controlled by provisions of

state corporate law?

4. Are Native Americans denied due process when claims

that their trustee sold their assets for inadequate consider-

ation are adjudicated without taking any evidence support-

ing the fact finder’s conclusions as to value?

5. When a Court of Appeals denies that it “is bound to

follow the Supreme Court’s decision” (App.* A, pp. 10-11)

(emphasis added) under either res judicata or collateral

estoppel, in a related case involving the same parties and

common issues, and rearticulates its own holding which had

theretofore been rejected by this Court,’ should this Court

direct further proceedings consistent with its prior opin-

ion?

*The abbreviation “App.” refers to the separately bound Appendix to this

Petition.

"In Affiliated Ute Citizens v. United States, 406 U.S. 128, 155 (1972)

ii

PARTIES TO THE PROCEEDINGS BELOW

The parties in the proceedings below are listed in the

caption, other than that Anita Reyos, the lead plaintiff in

Affiliated Ute Citizens v. United States, 406 U.S. 128 (1972)

was added as a party at the request of the respondent Bank

and that the Petitioners are the class representatives of all

so-called “mixed-blood” Ute Indians, as defined by the Ute

Termination Act of 1954.

this Court held that the Respondent “engaged in more than ministerial func-

tions,” and “[t]heir acts were clearly within the Reach of Rule 10b-5,” reject-

ing the contrary holding of the Court of Appeals expressed in the same terms.

The court below held that the same Respondent “was simply not engaged in

anything more than ministerial functions” (App. A, p. 18) (emphasis added )

and had no duty under Rule 10b-5.

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED FOR REVIEW ............. i

PARTIES TO THE PRECEEDING BELOW................ ii

ee I hides cides sehen acneceritapiononniatntis iil

FS, iu RINE RCE Ne ieee Rear cen nicer iii

CONSTITUTIONAL PROVISIONS, STATUTES,

ORDINANCES AND REGULATIONS INVOLVED.... iii

a vy * ) + yt ig | bY | eee 1

REASONS FOR GRANTING THE WRIT .................... 6

I. THE DECLARATION OF THE COURT BE-

LOW THAT IT WILL NOT “FOLLOW” A

DECISION OF THIS COURT SHOULD

ee I eink decesnieeccccenitnceniccorteiieateiconain 8

A. The Court Below Disregarded Affiliated Ute,

GUE TRECRECE 10 BO BO. acer cecevecesicinicererencenseineenennn 8

B. Res Judicata and Collateral Estoppel Apply

8, | SEN SEne DAE re) NS ea EN 11

C. The Intent of the Prior Mandate is Plain and

Pe Bee TRIO, Boi encttccitieatieneen 13

Il. REVIEW SHOULD BE GRANTED TO RE-

SOLVE CONFLICTS WITH THIS COURT

AND AMONG TIIE COURTS OF APPEALS

ON THE APPLICATION OF PROVISIONS

OF STATE CORPORATE LAW TO THE

FEDERAL SECURITIES LAWS ........................ 14

A. The Decision Below Conflicts with Decisions

of this Court on the Supremacy of Federal Law 14

B. The Decision Couflicts with Decisions of the

Courts of Appeals for the Second, Sixth,

Seventh, and Ninth Circuits on the Effect of

PPG BI. Gescieic ocacaeanieeiendedaamanniccs 16

C. The Court Below Misapplied this Court's

PN TI sisiistcceascesinerstonceiadieesneactpitate tannins 17

D. The Policy of the Federal Securities Laws

nr DIE, cc aiimanibieckenaiel ea ta as 19

Ill. REVIEW SHOULD BE GRANTED TO CON-

FIRM TRUST PROTECTIONS PROVIDED

TO AMERICAN INDIANS BY AN ACT OF

testi iii asieciisinisticccabadhccsaateraincaiabstn tassels 20

TABLE OF CONTENTS — (Continued)

Page

A. The Conclusion that Congress Abandoned the

Protections for Indians and their Property

Conflicts with Opinions of this Court and the

Court of Claims on the Effect of Termination. 21

B. The “Private Treaty” Protection Provided by

Congress in the Termination Act was Ignored

by the Bank, and Changed by Administrative

Beater pretations OF BLA. ...-----<<cvsecerreseereoreeeeons 22

(. A Presumption of Good Faith, in Lieu of “the

punctillio of an honor the most sensitive,”

Denies the Protections of Trust Law to Peti-

tioners and their Property and does so be-

cause they are Indians. ...............---cc0cocccoreevooae--- 26

D. A Presumption of Value Violates Funda-

IIE TE NOOO. ca riccciseetecinccondccccestrcvaterivineeeemes 29

NU iasdhcnmnieseminien 30

CASES CITED

Affiliated Ute Citizens v. United States,

I i icine Passim

Arenas v. United States, 322 U.S. 419 (1944) 00... 25

Arizona v. California ...... os

51 U.S.L.W. 4325 (U.S. Mar. 30, 1983) ................... 11

Arizona v. Maricopa County Medical Society,

Fg Os EC eee ee 26

Bacher v. Patencio, 232 F. Supp. 939 (S.D. Cal. 1964)

affirmed, per curiam, 368 F.2d 1010 (9th Cir. 1966)... 7

Ballinger v. Frost, 216 U.S. 240 (1910) —..0020 25

Bershad v. McDonough, 428 F.2d 693 (7th Cir. 1970)

cert. denied, 400 U.S. 992 (1971) ...........-.--.-c--ccecseceeeee 16

Cascade Natural Gas Corp. v. El Paso Natural Gas Co.,

Ce i ee AR heii nccsahictecmiertctsenanicrbsinecnnatioiees 13

City of Los Angeles v. Manhart, 435 U.S. 702 (1978)... 26

Champion Home Builders Co. v. Jeffress,

490 F.2d 611 (6th Cir. 1974),

cert. denied, 416 U.S. 986 (1974) ..............-..-0c--cceeeeeees 16

Coast Indian Community v. United States,

fe FF + Bp: : eemeenneneeenenennEenenaNce 28, 29

Commissioner v. Sunnen, 333 U.S. 591 (1948)................. 11

TABLE OF CONTENTS — (Continued)

Page

Cromwell v. County of Sac, 94 U.S. 351 (1877) -............. 11

Dixon v. United States, 381 U.S. 68 (1965) -.....220.222..... 24

Ernst & Ernst v. Hochfelder, 425 U. S. 185 (1976) ....20, 24

Federated Department Stores, Inc. v Moitie,

Bik Sy eee ee ee 11, 12, 13

Hart Steel Co. v. Railroad Supply Co.,

. oe Me Re | 7 anew eomee ens secee ese e 12

Herman & MacLean v. Huddleston, ...... Ss Sa

51 U.S.L.W. 4099 (U.S., Jan. 24, 1983).................. 15, 28

Klamath and Modoe Tribes v. United States,

436 F.2d 1008 (Ct. Cl. 1971),

cert. denied, 404 U.S. 950 (1971) ......22......-.c..-encceeeeee 22

Lone Wolf v. Hiteheock, 187 U.S. 553 (1903).......... 6, 27, 29

Manhattan General Equipment Co. v. Commissioner,

- fie Be. Fe | RNase meme es 24, 25

Marine Bank v. Weaver, 455 U.S. 551 (1982) -................. 15

Meinhard v. Salmon, 249 N.Y. 458, 164 N. E. 545 (1928).. 28

Menominee Tribe v. United States, 391 U.S. 404 (1968)... 29

Parklane Hosiery Co. v. Shore, 439 U.S. 322 (1979) ........ 12

Provident Securities Co. v. Foremost McKesson, Inc.,

506 F.2d 601 (9th Cir. 1974),

cert. denied, 423 U.S. 1077 (1976) ......-...--...2..-------0---- 16

SEC v. Capital Gains Research Bureau, Inc.,

Bit Bt. , Ree Renee enmeenin 15, 19, 28

SEC v. C. M. Joiner Leasing Corp.,

- Ba SR aR See dane enter ren 15

SEC v. National Securities, Inc., 393 U.S. 453 (1969)... 15

SEC v. Sterling Precision Corp.,

— 8 ke Te ht Se. | emer enemrerneeren DNDN 16

SEC v. United Benefit Life Insurance Co.,

I i 0 a eccouiaeiainn 15

SEC v. Variable Annuity Life Insurance Co.,

SR INCIRIERrnree sence oer eee 15

SEC v. W. J. Howey Co., 328 U.S, 293 (1946)........ 14, 17, 19

Tcherepnin v. Knight, 389 U.S. 332 (1967)......14, 15, 16, 17

Tyler v. Magwire, 17 Wall. [84 U.S.] 253 (1872) ............ 13

United Housing Foundation, Inc. v Forman,

Ok F )_. ESS ee dar seenenerteearen eens 17, 18, 19

United States v. Arenas, 158 F.2d 730 (9 th Cir. 1947)

Se IN, SE TI, ITED asvecnesetccenecdhncsicnirrcnessbicinnebaninae 26

TABLE OF CONTENTS — (Continued)

Page

United States v. Duncan, 667 F.2d 36 (Ct. Cl. 1982)

petition for cert. filed, 51 U.S.L.W. 3023

ie Se | | eee. LET eas ee 25, 28

United States v. Mitchell, 664 F.2d 265 (Ct. Cl. 1982),

cert. granted, 50 U.S.L.W. 3963 (U.S. Jun. 7, 1982).. 28

United States v. Naftalin, 441 U.S. 768 (1979)-.............. 28

United States v. Sioux Nation, 448 U.S. 371 (1980)..6, 27, 29

United States v. Topeo Associates, Inc.,

618 8 Le > : a ee sen erenoe 26

West v. Brashear, 39 U.S. 51 (1840) -..................0.............-- 18

Yanktown Sioux Tribe v. United States,

£ « Bo Fle ee i. | | Sane Nr.

CONSTITUTION, STATUTES AND RULES CITED

Unitep States Constitution, art. I, § 8, el. 3.2.2... 1. Z. Ze

Securities and Exchange Act of 1954

ON 1 Sg Ba | | ee RSI menace nema rman ERO er Vv

Ute Termination Act of 1954

EB Ry By eae seas aeatenE Passim

hs pecnaaelae iii

i a 72 caphensancocepabooni iv, 3, 3

ie AE, EE itera ae tno iv

EEE SSI cement ma EME NO shee aklr bo 29

Uta Code Annotated $ 16-6-21 sn cccissnencieees 14

Utah Non-profit and Cooperative Association Act........ 5

a scucersaopin anes caboaiics Passim

I asain 19

> A |): ROI Saas Seisene Sueeln es aan mR eRe ill

ok 7 Re ARNO eae maL area ae Ree Oates Soe ee Ue ili

2 tite EE aie ee ee RO On Ae eee ili, 1, 22, 29

AUTHORITIES CITED

Hearings on S. 3532 and H.R. 9398 Before the Senate

Committee on Interior and Insular Affairs,

Bee | eee anne 18

Washington Post, January 19, 1983, A7, col. 1 -............... 7

Washington Post, January 20, 1983, A2, col. 1 -............... 7

Salt Lake Tribune, April 10, 1982, A10, col. 1 -................ 7

S. Rep. No. 1632, 83d Cong. 2d Sess. ..............-.-..-..--.-----.--- 5

ili

OPINIONS BELOW

The opinion of the Court of Appeals, appearing at App.

A, is unreported. The opinion and findings of the District

Court on the merits, appearing at App. C, is reported at

521 F. Supp. 541. A separate opinion of the District Court

denying rehearing, appearing at App. D, is unreported.

JURISDICTION

The judgment of the Court of Appeals for the Tenth

Cireuit was entered on January 31, 1983. A timely petition

for rehearing and suggestion of rehearing en banc was

denied on March 21, 1983, and this petition was filed within

90 days of that date. This Court’s jurisdiction is invoked

under 28 U.S.C. § 1254(1), time for filing of which expires

June 19, 1983. See 28 U.S.C. § 2101 (e).

CONSTITUTIONAL PROVISIONS, STATUTES,

ORDINANCES AND REGULATIONS INVOLVED

1 Stat. 51 (1789) (reenacting Art. III of the Northwest

Ordinance of 1787):

The utmost good faith shall always be observed to-

wards the Indians; their lands and property shall

never be taken from them without their consent; and

in their property, rights and liberty, they never shall

be invaded or disturbed, .. .

The Ute Termination Act (“Termination Act’) is pub-

lished at 25 U.S.C. §4 677-677aa and is reproduced in its

entirety at App. E. Pertinent provisions concerning estab-

lishment of corporations and trusts are at Section 13 (25

U.S.C. § 6771):

The plan for division of the assets among the mem-

bers of the mixed-blood group may include:

lv

(3) Organization of corporations for the grazing

of livestock, handling of water and water rights, and

the shares therein may be issued to the members of

said group in proportion to their interests in the as-

sets of such corporations, ...

(4) A transfer of assets to one or more trustees

designated by said group who shall hold title to all

or any part of the property of said group for manage-

ment or liquidation purposes under terms and condi-

tions prescribed by said mixed-blood group... .

Section 15 (25 U.S.C. §677n) :

...In the event a member of the mixed-blood group

determines to dispose of his interests in any of said

real property at any time within ten years from An-

gust 27, 1954, he shall first offer it to the members

of the tribe .... (Emphasis added.)

and Section 22 (25 U.S.C. §677u) :

. the Secretary [of Interior] shall protect the

rights of members of the tribe who are minors, non

compos mentis, or, in the opinion of the Secretary, in

need of assistance in conducting their affairs, by

such means as he may deem adequate ....

The Plans for Division and Distribution, held by this

Court to be action taken “pursuant to the Partition Act

[and] contemplated by the Act,’’ (406 U.S. 128, 143-44)

have the dignity of regulations and provide in pertinent

part:

Shares of stock distributed to members who have no

present use for the same may be leased or sold at

the will of the holder thereof subject to the articles

of incorporation’ and by-laws of the corporation and

in accordance with law. (Exhibit 20.)

?The Articles of Incorporation are Exhibits 76 and 77 and for both cor-

porations provide:

If any stockholder who is a member of the mixed-blood group of said

Ute Indian Tribe determines to sell or dispose of his stock in this

0 0 OO

Vv

The relevant provisions of the Securities Exchange Act

of 1934 (“Exchange Act”) are reproduced at App. F and

inelnde Section 10(b) [15 U.S.C. § 78j}(b)] and Rule 10b-5

adopted thereunder (17 C.F.R. 240.10b-5).

corporation at any time prior to August 27, 1964, he shall first offer it

to the members of the tribe, including the mixed-blood and full blood

members thereof, and no sale of any of said stock prior to said date

shall be valid unless and until such offer is made to said members of

the tribe in such form as may be approved by the Secretary of Inte-

rior. (Emphasis added. )

Petitioners, Randolph C. Hackford, et al., respectfully

pray that a writ of certiorari issue to review the judgment

and opinion of the United States Court of Appeals for the

Tenth Cireuit in this proceeding rendered on January 31,

1983.

STATEMENT OF THE CASE

The issues framed by the opinion of the Court of Ap-

peals are simple, being confined to three purely legal con-

clusions with respect to (1) the interrelationship of the trust

and Indian laws of the United States, (2) the interface of

federal securities laws with state corporate law, and (3) the

application of res judicata and collateral estoppel. The

facts, though complex, are also favorable for the consider-

ation of this Court, being essentially stipulated.

Petitioners are so-called “mixed-blood’’ Ute Indians of

the Uintah and Ouray Reservation, Utah, who were “term-

inated’* from federal supervision by one of a series of acts

of Congress adopted in 1954. The mixed-bloods thus term-

inated brought suit against the fiduciary established for

them by the Secretary of the Interior, alleging breach of

trust and breach of the anti-fraud provisions of the securi-

’The term “mixed-blood” is mandated by Section 2 of the Termination

Act. (App. E. at p. 137.) This Court observed in Affiliated Ute Citizens v.

United States, 406 U.S. 128, 133 (1972) that “[i]nasmuch as the statute spe-

cifically employs the terms ‘full-blood’ and ‘mixed-blood,’ we feel compelled,

for purposes of consistency and clarity, to do the same. No slur or offense

whatsoever is intended.”

‘In 1954, Congress embarked upon another of the all-too-frequent shifts

in policy which have characterized the history of Indian affairs. Known as

“termination,” the new policy included the transfer of Indian property to ordi-

nary business corporations formed under state law, substitution of commercial

banks for the United States in certain of the Government's trust duties, and the

ending of the “special relationship” between the sovereign and its Indian wards

rooted in Constitutional principles dating from the Northwest Ordinance of

1787. See U.S.C.A. Const., Ordinance of 1787, art. III, reenacted by Act of

Aug. 7, 1789, 1 Stat. 51 (1789), and the U. S. Consr., art. I, § 8 cl. 3. The

theory was that the so-called “Indian problem” could be ended by legislating

changes in the Native American’s economy and socio-legal status. The policy

proved the most unpopular among the Indians, perhaps, of any ever imposed

on them.

al

2

ties laws of the United States in connection with the sale

of their capital stock in two range corporations. The range

corporations in the matter at bar were simultaneously

formed with and were similar to the holding corporation for

mineral rights which was the subject of Affiliated Ute Citi-

zens v. United States, 406 U.S. 128 (1972) (“Affiliated Ute”

herein). In most other respects, the facts herein are ma-

terially the same as in Affiliated Ute.

The pertinent provisions of the Termination Act were

reviewed by this Court in Affiliated Ute. (406 U.S. 128,

135.)

The Respondent, First Security Bank of Utah, National

Association (the “Bank”) was selected by the Bureau of

Indian Affairs (“BIA’’) for the protective purposes speci-

fied in Sections 13 and 22 of the Termination Act, supra.

The chief executive officers of the Bank solicited the

Secretary of Interior for those responsibilities over a period

of several vears (406 U.S. 128, 152) and the Bank was fin-

ally designated trustee as to all Indian minors and transfer

agent for the corporations under arrangements this Court

found in Affiliated Ute gave rise to fiduciary duties to all

mixed-bloods. (406 U.S. 128, 154.)

The agreed facts were that the Bank sold the stock of

the trust beneficiaries, before the stock was issued® and in

disregard of higher offers from mixed-blood “members of

*The Minutes of the Trust Committee of the Bank were stinulated. They

recite that on September 13, 1960, a “meeting [was] called at the request of

[the tribal attorney], in order that he might present to the Committee a pro-

posal of the Ute Tribe to purchase as a block the shares of stock” of the two

corporations. (Exhibit 158.) Nine days later, on September 22, 1960, the

Trust Committee resolved to sell the shares of 147 of the 174 Indians subject

to the trust, for the price of $1,100 per unit (4.¢., one share in each corpora-

tion). (Exhibit 166.) No negotiations over the price are reflected in the min-

utes and the price was as proposed by the purchaser, exactly. The stock certifi-

cates were not issued until October 20, 1960, and on the date of the resolution

to sell, the corporations had not commenced doing business. See App. C, p. 36.

3

the tribe.’” The sale was in disregard of the mixed-bloods’

first refusal option (referred to by BIA, and herein, as a

“private treaty’’ right) imposed by Congress in the Term-

ination Act and contained in the plans. (See 25 U.S.C. §

677n, supra., and at App. E, p. 149 and note 2, supra.)

Petitioners alleged that the parents of the trust bene-

ficiaries were then forced to sell their own shares, or be left

in the untenable position of being minority shareholders in

a cerporation controlled by the Tribe, whose interests under

the Termination Act were necessarily divergent from their

own. The Bank’s participation in causing that effect was an

alleged breach of trust as to all mixed-bloods.

The major focus in the court below was on the question

of the value of some 172,000 acres of land, which was the

sole asset of the two corporations. It is uncontroverted that

the Bank sold the capital stock without obtaining an inde-

pendent appraisal of the land’ and the trial court so deter-

mined. (See App. C p. 88.) The court below nevertheless

®The trial judge concluded that “one Margaret Sprouse, a mixed-blood,”

accepted the offer of the Bank to sell the shares of the trust beneficiaries ( App.

C, p. 47) and that she “was willing to pay as much as $1500 a unit, and had

resources available to accomplish the purchase of a controlling interest in the

corporations.” (App. C, p. 93.) The stipulated evidence also established that,

in addition to Mrs. Sprouse, Joseph Arthur Workman, a Director of Affiliated

Ute Citizens (“AUC”), obtained financing in the amount of $500,000 for the

purchase of shares (see AUC. Minutes, Exhibit 75, for Jan. 25 and Jun. 22,

1960; Exhibits 347, 379, 380 and 381); Calvin Hackford, a Director of one

of the range corporations, obtained financing in the amount of $400,000 to

purchase shares at amounts in excess of $1,100 per unit (Exhibit 75, supra.,

Minutes for Jul. 12 ,1960); and other Indians testified at the time of trial that

they were willing to pay as much or more for the shares but were not allowed

to do so.

?The Trust Committee Minutes contain no reference to a request for an

appraisal and the trust officer who testified at the trial indicated he had “no

personal knowledge” of an appraisal. (Transcript of Proceedings, p. 855.)

An affidavit of the Bank’s former trust officer recites that “the price [was]

10% above the value at which the lands were appraised in making a division

of Tribal assets... .” (Exhibit 163.) (Emphasis added.)

4

presumed that Petitioners were paid a fair price for the

individual Indian’s pro-rata share of the range, by refer-

ence to a disputed appraisal in the record conducted by the

BIA several years prior to the sale. The BIA appraisal was

never offered in evidence to establish value,* however, and

was determined in Affiliated Ute not to be a fair market

value appraisal for the purpose of sale.°

The court below ignored uncontroverted expert evidence,

stipulated as to qualifications, on the value” of the land,

and held that reliance on the out-dated appraisal was in

“good faith.”’ (See App. A, p. 21; App. C, p. 87 and App. D,

pp. 151-52). In fact there was no evidence that the Bank

ever saw the disputed appraisal"? or communicated its con-

tents to the trust beneficiaries. Moreover, the legislative his-

tory of the Termination Act indicates that Congress was

*The so-called “Moore appraisal,” as the BIA appraisal was known, was

in evidence as part of the background of facts concerning the implementation

of the land division under the Termination Act. No witness at trial testified

that it reflected a fair value as of the date of sale or for that purpose.

°The findings of the trial judge in Affiliated Ute included the following,

appearing at pages 503-04 of the Appendix on file with this Court:

6. In 1958 the Bureau of Indian Affairs, acting in cooperation with

the Ute Indian Tribe, did undertake the appraisal of the assets repre-

sented by the capital stock of the two related corporations, Rock Creek

Cattle Range Company and the Antelope Sheep Range Company... .

The primary purpose of the appraisals on the two land corporations

was to carry out the division of assets found in Public Law 671.

These surface appraisals were later used by the Tribe in determining

what they would pay for the range stocks. The appraisals were not

made for the purpose of fixing the value of the stock at the time of

its sale to the Tribe. (Emphasis added. )

10Richard Palmer, an appraiser who testified as an expert pursuant to a

stipulation by the Bank as to his qualifications, testified that the 172,000 acres

of land had a value of $2,456,000 on the date of sale, without regard for min-

erals, water, timber or hunting and fishing rights. (Transcript of Proceedings,

p. 1004.) That value represents $4,400.20 for each unit, compared with the

$1,100 for which they were sold. Palmer's testimony was not controverted by

any evidence.

5

told six vears earlier that the land had a significantly great-

er value.”

The trial court determined the facts consistently with

Petitioners’ allegations, but nevertheless dismissed Peti-

tioners’ claims, The Court of Appeals for the Tenth Cir-

cuit affirmed on the three legal bases cited above,

As regards Petitioners’ securities law claims, the Court

of Appeals held that the “range corporation stock was not a

‘security.’ “Had the corporations been designed to profit

the shareholders, either through distribution of earned in-

come or by the enhancement of stock value, they could not

have been organized under the Utah Nonprofit and Cooper-

ative Association Act,” (App. A, p. 15) the Court of Ap-

peals reasoned. The Bank’s sale of the stock did not involve

“anything more than ministerial] functions,’”* and this

Court’s contrary conclusion need not be “followed.’’ (App.

A, pp. 10-11. See also App. C, p. 82.)

11The assistant trust officer who handled the mixed-blood account testified

that “I do not recall ever having seen a [sic] appraisal report concerning the

real property which [the two corporations] owned.” (Transcript of Proceed-

ings, pp. 734-5.) The Tribal attorney answered “no” when asked by counsel

for the Bank if the $1,000 per share figure he quoted to the Trust Committee

was “based on the Moore appraisal.” “The full-bloods . . . requested the Phoe-

nix office to appraise” for them, the tribal attorney explained. (Transcript of

Proceedings, pp. 1160-61.) The trust officer who testified at trial was only to

“assume [that the Moore Appraisal] was with our files at that point in time.”

(Transcript of Proceedings, p. 890.)

12See S. Rep: No. 1632, 83d Cong., 2d Sess. at p. 6: “This proposed leg-

islation involves division of . . . . land, estimated on the basis of 980,000

acres at $5 per acre, excluding subsurface rights which were not to be divided

. . . $4,900,000.” $1,100 per unit for the shares amounts to $539,000 for all

of the stock issued which, divided by 172,000 acres, equals $3.13 per acre.”

(Emphasis added.) Even the Bank and its witnesses agreed that land values

increased significantly during that period of time.

13Compare, this Court’s holding that the Bank “engaged in more than

ministerial functions . .. And they were acts performed when they were obli-

gated to act on behalf of the mixed-blood sellers.” Affiliated Ute Citizens v-

United States, 406 U.S. 128, 154 (1972).

6

As regards Petitioners’ claims of breach of trust, the

Court of Appeals held that “[t]he Bank’s interpolation of

the range land value from nearby property values and the

expert testimony was reasonable under the circumstances.”

(App. A, p. 21.) (Emphasis added.) That holding para-

phrased the trial court’s conclusion that the trustee’s du-

ties must be measured against the standards applied to the

sovereign in related circumstances, and that the legal test

is “good faith.”*

Important issues not addressed by the Court of Appeals

were (1) Petitioners’ objections that neither the BIA ap-

praisal, nor any other opinion evidence supporting the con-

clusions of value, was offered or received in evidence; (2)

the contention that disregard of the private treaty right

vested in Petitioners by the Termination Act, the Plan and

Articles of Incorporation amounted to a rewriting of the

Termination Act by BIA and (3) that the Bank’s acqui-

escence in the disregard of the private treaty violated the

trust duty to act on behalf of the mixed-blood shareholders

(406 U.S. 128, 152) and to conserve the trust assets.

REASONS FOR GRANTING THE WRIT

This case presents important questions of national pol-

icy touching the lives of the entire Native American popu-

lation of this country — questions rendered more acute by

the calculated disregard of this Court’s pronouncements on

the application of the commercial law of trusts and securi-

ties to rights of Indians in the process of “termination.” Any

change in the protected status of the Native population,

14In a separate opinion reproduced at App. D, the trial court cited United

States v. Sioux Nation, 448 U.S. 371 (1980) and Lone Wolf v. Hitchcock,

187 U.S. 553 (1903) holding that, because of sovereign immunity, the

United States may abrogate its treaty obligations to Indians and held that they

applied to the duies of the Bank herein.

7

whether Indian, Polynesian or Eskimo, will be impacted

by this Court’s work in these cases.

“Termination” (7.c., ending the traditional and Consti-

tutionally mandated special relationship hetween Native

Americans and the United States, by legislating changes in

their culture and economy, sec note 4) remains a tragedy

for the many thousands of American Indians already sub-

jected to it. The spectre of its renewal is a recurring fear

of those who have not vet fallen victims to the policy.’* The

decision herein magnifies their tragedy and validates their

fears, by altering the entire fabric of Indian law and reject-

ing the customary requirement of straight dealing’® with

respect to Indians and their property. Terminated Indians

are relegated to a second class status, to the extent that

they are not accorded rights under federal securities laws

or as a trust beneficiary equivalent to those applied for non-

Indians.

Unless reversed, the decision of the Court of Appeals

will result in the work of this Court in defining and safe-

guarding the rights of terminated Indians being ignored, at

best, and perhaps destroyed altogether.

In 1933, Indian leaders from Wisconsin, Minnesota, Arizona and Cali-

fornia, the Pueblo Council of 19 New Mexico reservations and the National

Tribal Chairman’s Association representing 154 member tribes, called for the

“ouster” of Secretary of Interior Watt, Washington Post, Jan. 20, 1983, at A2,

col. 1, after he said that reservations “fail tc integrate [the Indians] into Ame-

rican social life.’ Washington Post, Jan. 19, 1983, at A7, col. 1. In 1982, Indian

groups throughout the nation were alarmed over a letter of Congressman James

V. Hansen to Secretary Watt concerning a bill “which proposes termination,

all supervision of Indians and tribes.” S. L. Tribune, April 10, 1982, at A10,

col. 1. Other examples occur yearly..

16g. Bacher v. Patencio, 232 F. Supp. 939, 941 (S.D. Cal. 1964)

affirmed, per curiam 368 F.2d 1010 (9th Cir. 1966): “as Justice Holmes once

said, people must turn square corners when they deal with their government.

They must do the same when dealing with their government's wards.”

8

I

THE DECLARATION OF THE COURT BELOW

THAT IT WILL NOT “FOLLOW” A DECISION

OF THIS COURT SHOULD BF REVERSED

The declaration of the Court of Appeals that it would

not ‘follow the Supreme Court’s decision in Affiliated Ute

Citizens v. United States, 406 U.S. 128” (App. A, pp. 10-

11) (emphasis added) threatens the integrity of the Com-

mon Law system. The court below declared that it would

not do so, even though the same Indians, the same Bank,

the same trust and fiduciary arrangements, the same legal

issues, concerning companion corporations, simultaneously

formed, by the same act of the same Indians, pursuant to

the same clause of the same plans, adopted under the same

Termination Act, for common purposes, with the same

shareholders, whose stock was held under the same transfer

agent arrangements, were being considered by the same

judge of the same Court of Appeals. The declaration was a

casual one, in an opinion marked “not for routine publica-

tion,” which has the appearance of a frivolous treatment of

rights this Court has found substantial.

A. The Court Below Disregarded Affiliated Ute,

and Intended to do so.

The opinion below disregards two fundamental holdings

of Affiliated Ute.

1. The holding of Affiliated Ute, with respect to trust,

was that the Bank’s acts “were acts performed when they

were obligated to act on behalf of the mixed-blood sellers.”

(406 U.S. 128, 154.) This Court affirmed the trial court’s

finding of a fiduciary relationship” on the same facts in-

‘7In addition to the conclusions of this Court quoted above the findings,

of the trial judge in Affiliated Ute include the following, appearing at pp. 521

and 536 of the Appendix on file herein:

30. By reason of the said Agreement of December 31, 1958, the said

9

volved herein because “the bank itself had acknowledged,

by letter to AUC in January 1958, that ‘it would be our duty

to see that these transfers were properly made.’ ” With re-

spect to the sale of shares, this Court concluded further,

“ ‘the bank [agreed that it] would he acting for the individ-

ual stockholders.’ ’’ (406 U.S. 128, 152.)

With the same documents before it, and with complete

awareness of this Court’s holding, the Court of Appeals

nevertheless declared that “the Bank had no fiduciary duty

to the mixed-blood adults.” (App. A, p. 19.) (Emphasis

added.) The only justification offered for denying a fidu-

ciary relationship, on the same facts which led this Court

to hold that one was present, was that different assets were

being administered.

2. In the process of finding a fiduciary relationship in

Affiliated Ute, this Court also reversed the Court of Ap-

peals’ finding of “no duty [under Rule 10b-5] on the part

of this defendant to any of the plaintiffs as his acts were

purely ministerial in character.” (431 F. 2d 1337, 1346.)

This Court pointedly declared that when the Bank facili-

tated the sale of Ute Distribution Corporation stock it was

“engaged in more than ministerial functions” and its “acts

Affiliated Ute Indian Trust Agreement of July 26, 1960, the said

Boyden letter of July 22, 1959, and the implementation of the said

agreements and instructions . . . said Bank an its agents . . . came into

possession of personal and confidential information and financial rec-

ords of mixed-bloods. . . .

31. ... First Security Bank and its agents . . . were at all times

pertinent to plaintiffs’ claims fiduciaries in the sense that they occu-

pied a position of trust and confidence with reference to . . . each of

the mixed-blood stockholders of Ute Distribution Corporation.

15. The Bank occupied toward the mixed-blood Indians not coming

within the express provisions of the trust if not the position of a

fiduciary in the strict sense at least a duty to deal with and for the

mixed-bloods in good faith and lawfully without purpose of over-

reaching or imposition.

10

were clearly within the reach of Rule 10b-5.” (406 U.S. 128,

154.)

With that holding by this Court before it, the Court of

Appeals nevertheless held that the Bank “was not engaged

in anything more than ministerial functions” (App. A, p. 18)

(emphasis added) when it facilitated, and what is more,

actually conducted the sale of stock in these range corpora-

tions.

* * * *

The contradictions on both points seem careless, if not

openly defiant of this Court’s opinion. To declare, in any

circumstances, that it will not “follow” a binding decision

issued by this Court — one issued “because of the impor-

tance ... for Indians whose federal supervision is in the

course of termination” (406 U.S. 128, 141) — seems doubt-

ful poliey, indeed, for the Court below.

Granted we can distinguish the sheep and cows of these

range corporations from the oil derricks of the Ute Distri-

bution Corporation, and we can agree that the corporations

ruanaging them have different purposes. Is that distinction

of any force, however, when the question is whether the

Bank was a fiduciary or had a duty under Rule 10b-5? Jus-

tice Blackmun looked to the representations the Bank made

to these Indians for the answer to those questions, not to

the nature of the Ute Distribution Corporation. Preoceupa-

tion with the nature and/or assets of the companies whose

stock was held by the trust, to the exclusion of an examin-

ation of the instruments giving rise to the fiduciary rela-

tionship and the federal policy under the securities laws,

led the Court of Appeals to wholly disregard the plain hold-

ing of Affiliated Ute.

What is presented is not a case of careful distinction of

a prior opinion on its facts.

11

The same judge writing for the Court of Appeals herein

authored the opinion this Court reversed in Affiliated Ute.

His rationale herein is a mere rearticulation of the precise

terms this Court rejected in Affiliated Ute. His disregard

of this Court’s prior opinion was calculated, for it was pre-

faced with the quare at App. A, p. 10, “[a]t the outset, we

consider the plaintiffs’ contention that this court is bound

... to follow” Affiliated Ute. (Emphasis added.)

B. Res Judicata and Collateral Estoppel

Apply in This Case.

The declaration of the Court of Appeals that “{b]oth

doctrines [of collateral estoppel and res judicata] require

an identity of factual issues in the two cases” is plain error.

It ignores, moreover, recent pronouncements of this Court.

1. With respect to res judicata, this Court has recently

reaffirmed that “[a] final judgment on the merits of an

action precludes the parties or their privies from relitigat-

ing issues that were or could have been raised in that ac-

tion.”” (Emphasis added.) Federated Department Stores,

Inc. v. Moitie, 452 U.S. 394, 401 (1981), citing Commissioner

v. Sunnen, 333 U.S. 591, 597 (1948) ; Cromwell v. County of

Sac, 94 U.S. 351, 352-53 (1877). The rule thus applies to

issues, between the parties or their privies, and not merely

to facts. The “facts” surrounding the water claims of the

Indian intervenors in Arizona v. California, ...... if Sv

51 U.S.L.W. 4325 (U.S., Mar. 30, 1983) had plainly not been

litigated, but this Court nevertheless applied res judicata

and declared that “[f]inality principles would become mean-

ingless if an adversarially-determined issue were final only

if the equities were against revising it.” Jd at 4331. (Em-

phasis added.) The “issue” was final, moreover, even

though the Indians intervened in the same action pursuant

to a retention of continuing jurisdiction.

12

The issues of “trust” and “duty” were clearly litigated

in Affiliated Ute. Just as clearly litigated was the issue of

whether the BIA appraisal was evidence of fair market

value. Respondent Bank was a party to Affiliated Ute, as

was Petitioner Anita Revos.

This Court said in Moitie that “‘{s]imple justice’ is

achieved when a complex body of law developed over a per-

iod of vears is evenhandedly applied,” for:

The doctrine of res judicata serves vital public in-

terests beyond any individual judge’s ad hoe deter-

mination of the equities in a particular case... . It

is a rule of fundamental and substantial justice, “of

public policy and private peace,” which should be

cordially regarded and enforced by the courts....

Op. cit. supra at 401, quoting from Hart Steel Co. v. Rail-

road Supply Co., 244 U.S. 294, 299 (1917).

2. Even in cases not involving the same parties or priv-

ies, collateral estoppel bars relitigation of the same ?ssues.

Parklane Hosiery Co. v. Shore, 439 U.S. 322, 332-33 (1979).

The conditions of Parklane are fully satisfied herein. Here,

as in Parklane, “the contemporary law of collateral estoppel

thus leads inescapably to the conclusion that [the Bank is]

collaterally estopped.” Jd. at 332-33.

The Court of Appeals nevertheless declared that “the

plaintiffs’ claim that we are bound by collateral estoppel

and res judicata [is] unpersuasive.” (App. A, p. 11.) The

reason advanced, viz., that there was different stock, of cor-

porations with different purposes, and different acts, sim-

ply fails to address the issues previously litigated. Those

differences necessarily are present when the prior decision

is applied to other “Indians . . . in the course of termina-

13

tion,” or to the myriad other cases involving non-Indians

having no remote connection to the facts herein, which have

properly “followed” Affiliated Ute.

C. The Intent of the Prior Mandate is Plain

and Should Be Enforced.

Since the days of Chief Justice Taney, and before, it

has been held that “when the direction contained in the man-

date is precise and unambiguous, it is the duty of the Cir-

cuit Court to carry it into execution, and not to look else-

where for authority to change its meaning.” West v. Bra-

shear, 39 U.S. 51, 54 (1840). The situation herein is similar

to Tyler v. Magwire, 17 Wall. [84 U.S.] 253, 282 (1872),

where the lower court was reversed a second time because

it “entered a new decree . . . which in effect evades the di-

rections given by this court, and practically reverses the

judgment and decree which the mandate directed them to

execute.” Appropos such holdings, Justice Rehnquist re-

cently declared that the “language used by this Court half

a century ago is even more compelling in view of today’s

crowded dockets.” Federated Department Stores, Inc. v.

Moitie, 452 U.S. 394, 401 (1981).

In modern times, this Court has prevented calculated

efforts to evade its mandate by ordering the Judicial Coun-

cil to “assign a different District Judge to hear the case.”

Cascade Natural Gas Corp. v. El Paso Natural Gas Co., 386

U.S. 129, 142-43 (1967). The Court of Appeals’ decision is

based on no issues other than the “trust” and “duty” ques-

tions, both of which were decided in Affiliated Ute. This

Court should reverse, or at least remand with directions to

“follow” Affiliated Ute.

14

II

REVIEW SHOULD BE GRANTED TO RESOLVE

CONFLICTS WITH THIS COURT AND AMONG THE

COURTS OF APPEALS ON THE APPLICATION OF

PROVISIONS OF STATE CORPORATE LAW TO

THE FEDERAL SECURITIES LAWS

The opinion of the Court of Appeals presents conflicts

with decisions of this Court, and with other Courts of Ap-

peals, on the application of the federal securities laws vis-a-

rts provisions of state corporate law. That is so because

the sole justification offered by the court below for the

conclusion that the capital stock given to Petitioners, in

exchange for their equity in 172,000 acres of land, was not

a “security,” was the claim that provisions of state corpor-

ate law prohibited “enhancement of stock value.’’ (App. A,

p. 15.) In point of fact, Utah law says no such thing,” but

what is important to this Petition is the issue of supremacy

of federal law.

A. The Decision Below Conflicts with Decisions of this

Court on the Supremacy of Federal Law.

To the extent that it allows provisions of state law to

control the effect of the federal securities laws, the decision

below ignores the time-honored and recently reaffirmed

policy of this Court. SEC v. W. J. Howey Co., 328 U.S. 293,

298 (1946) held that form may not exalted over substance.

Precise to the issue, this Court declared in Tcherepnin v.

Knight, 389 U.S. 332, 337 (1967), that “[wJhile Illinois law

gives legal form to the withdrawable capital shares held by

the petitioners, federal law must govern whether shares

18Utah Code Ann. § 16-6-21 provides that the corporation may not be

formed for pecuniary profit. It does not say that there may not be an “enhance-

ment of stock value.”

15

having such legal form constitute securities under the Se-

curities Exchange Act,” (emphasis added) citing SEC v.

Variable Annuity Life Ins. Co., 359 U.S. 65, 69 (1959). This

Court’s threshold decision in SEC v. C. M. Joiner Leasing

Corp., 320 U.S. 344, 353 (1943) held that “it is not inapprop-

riate that... offerings be judged as being what they were

represented to be.”’

The Court of Appeals did not inquire into whether the

shares could produce a profit, whether the shares were im-

posed upon these Indians with the promise that they would

do so, whether the shares appreciated in value or whether

the mixed-bloods were promised there would be a market

for the trading of the shares. Lacking, also, was any inquiry

into the availability of effective alternate systems for the

protection of investors, which this Court has consistently

required in those limited situations where exemptions have

been implied. See Marine Bank v. Weaver, 455 U.S. 551

(1982). Accord, SEC v. National Securities, Inc., 393 U.S.

453 (1969); SEC v. United Bencfit Life Insurance Co., 387

U.S. 202 (1967); SEC v. Variable Annuity Life Insurance

Co., 359 U.S. 65 (1959).

This Court has recently reaffirmed its frequently re-

peated dictum “that securities laws combating fraud should

be construed “not technically and restrictively, but flexibly

to effectuate [their] remedial purposes.’” Herman & Mc-

Lean v. Huddleston, ...... U.S. ..., 51 U.S.L.W. 4099, 4102

(U.S., Jan. 24, 1983) quoting from SEC v. Capital Gains

Research Bureau, Inc., 375 U.S. 180, 195 (1963).

The record is clear and uncontroverted that, had the

Court below undertaken any of the multiple inquiries re-

quired, these shares had cach of the attributes this Court

has held impart “security” status to an instrument or ar-

rangement. The record is equally clear and uncontroverted

that shares in these corporations were distributed in the

16

process of removing the protections previously afforded by

BIA under the Indian laws.

B. The Decision Conflicts with Decisions of the Courts of

Appeals for the Second, Sixth, Seventh, and Ninth Cir-

cuits on the Effect of State Law.

Other courts of appeals have uniformly given effect to

this Court’s declaration of federal supremacy in Tchere pnin.

They have uniformly rejected the notion of reverse or state

supremacy applied herein.

The Court of Appeals for the Ninth Cireuit declared

that “Federal law governs .... the question of when a

sale is complete for purposes of section 16(b) |and] must

be decided so as to foster the goals of the federal legisla-

tion rather than under concepts of when title passes under

state law.” Provident Securities Co. v. Foremost McKesson,

Tuc., 506 F, 2d 601, 606 (9th Cir. 1974), cert. denied, 423

U.S. 1077 (1976). The Court of Appeals for the Sixth Cir-

cuit declared that “|t]he definition of [“purchase” and

“sale” under the Exchange Act] is a matter of federal law

. . not to be limited or defined solely in terms of commer-

cial law of sales and notions of contractual rights and du-

ties.” Champion Home Builders Co. v. Jeffress, 490 F. 2d

611, 615 (6th Cir, 1974), cert. denied, 416 U.S. 986 (1974).

The Court of Appeals for the Second Cirenit held that

“(the SEC is right in saying we should decide the issue [of

the meaning of the term “purchase’’} as one of federal law,

even though a Delaware court construing its corporation

laws might come to a different conclusion.” SEC v. Sterling

Precision Corp, 393 F. 2d 214, 217 (2d Cir. 1968). To the

same effect see Bershad v. McDonough, 428 F. 2d 693, 696

(7th Cir. 1970), cert. denied, 400 U.S. 992 (1971).

The decision of the court below is at odds with the fore-

going decisions. That conflict is complete, for the Court of

17

Appeals made no inquiry other than its reference to the

state law.

C. The Court Below Misapplied this Court’s

Foreman Decision.

Though the Court of Appeals effected comfort from

United Housing Foundation, Inc. v. Forman, 421 U.S. 837

(1975), it is clear that it failed to apply the holding of that

ease. Forman did not hold that provisions of state law could

be relied upon to exempt any arrangement from the scope

of federal regulation. To the contrary, Forman reaffirmed

the “basic principle that has ruided all of the Court’s de-

cisions in this area: ‘[I]n searching for the meaning and

scope of the word ‘security’ in the Act[s], form should be

disregarded for substance and the emphasis should be on

economic reality.” Tcherepnin v. Knight, 389 U.S. 332, 336

(1967). See also, Howey, supra, 328 U.S., at 298.” (421 U.S.

837, S48).

This Court gave little weight, if any at all, to the forma-

tion of the housing cooperative involved in Forman under

the nonprofit provisions of state law. Memberships in the

cooperative were held not to be a “security’’ only because

a detailed analysis of the terms of the offering led to the

conclusion that they did not possess the attributes normally

associated with stock. In doing so, this Court was emphatic

that there must be an inquiry into the elements of the fed-

eral definition:

... do they [possess] the other charactertistics tradi-

tionally associated with stock: they are not negotia-

ble; they cannot be pledged or hypothecated; they

confer no voting rights in proportion to the number

of shares owned; and they cannot appreciate in value.

(421 U.S. 837, 851.)

Neither the trial court nor the Court of Appeals conducted

such an inquiry herein. It could not be concluded, in the

18

.

words of Forman, that these Indians “purchase! d]| a com-

‘Thodity for personal consumption or living quarters for per-

sonal use,” (421 U.S. 837, 858) for the minutes of the trust

committee recited that “very few lived in the Roosevelt

area and that many lived outside the State of Utah,” and

that “{i]t was evident that there was little chance that any

‘19

of these could make personal use of the grazing rights...

Substantially all of them, moreover, were compelled to sell

by the practices alleged. in most cases before a single graz

ing season had arrived and before the stock was issued. Pre

cisely opposite to the situation in Forman, where “purehas

ers |were| informled| that they will be unable to resell,”

(421 ULS. S37, 854). it was represented to Congress*” and

stipulated as a fact that these Indians were assured that

“individuals can trade their shares” and could “give vont

interest in vour distributive share to get more shares in

the cattle and sheep operations.”

The trial judge acknowledged these facts (see App. B, p.

36) as did the Court of Appeals with its declaration that

“(tlhe corporations were formed to convert the undivided

interests of each mixed-blood into something which could

hy easily transterred and soMmeth ny whieh could he ised

as an indicia |sie} of ownership.” (App. A. p. 13 fern

phasis added.) The Court of Appeals neverthelesss failed

to apply the facts as this Court directed in Forman

These range corporations and the distribution corpora

tion this Court considered in Affiliated Ute are precisely

'Exhibie 165, stipulated by use parties

| W je know there are a whole group in Salt Lake and other places that

will jyuse want their interest our We also know that there are quite a few

that have much more cattle than their interest will sunport. So these people

have to arrange to buy out the other people that will want to sell.” Hearings on

S. 3532 and H.R. 9398, before :he Senate Commuttee on Intersor and Insular

Affasrs, 83d Cong., 2d Sess. (1954), p. 43. (Exhibit 2A. )

*1See Minutes of Meetings of the Affiliated Ure Citizens for Dec. 8, 1958,

Jan. 12, 1959, Mar. 7, 1959, and Apr. 7, 1959, Exhibit 75; Exhibit 429

19

the same when measured by the elements this Court defined

in Forman, All three were negotiable. Limitations on pledge

and hypothecation were the same, They all had precisely

the same voting rights. All three appreciated in value. The

“common enterprise” element’ was in fact /ess present in

the distribution corporation than with these range corpor-

ations.”’ All three have the very same attributes (other than

formation under the “nonprofit” provisions of state law)

with virtually identical provisions in their charters. In truth,

the court below stood this Court's holding on its head, for

Forman held that the definitional sections of the securities

laws may not be given literal effect. The court below never

theless gave the “non-profit” definition of state corporate

law literal effect, and applied it in such a way it overrides

federal law.

1). The Poli Woot the Ie di ral Ne ( Mritee s Lau S 11S Taunore d.

To deny the coverage and reach of the federal securities

laws to corporations not fitting the classic pattern, or whose

commercial objects are arcane, exempts an inportant seg

ment of industry from needful regulation mandated by Con

gress in 1932-34. It also ignores the entire history of legal

development surrounding those remedial measures, which

have stressed the flexibility of the securities laws. F.q.,

Affiliated Ute. That, in truth, was the teaching of SEC +.

Howey Co., 328 U.S. 298 (1946) and its progeny; the teach-

ing of the line of cases defining “fraud” under the federal

securities laws, of which Affiliated Ute forms an important

part, e.g., SEC v. Capital Gams Research Bureau, Ine., 375

U,

S. 180 (1963): and the teaching of those recent cases con-

*2Discussed in, e.g., SEC v. W. J. Howey Co., 328 U.S. 293 (1946).

*5That is so because the distribution corporation involved in Affiliated

Ute held a mere 27% of the undivided mineral estate, and voting with the

Tribe was proportional — thus leaving the Tribe in absolute control. See, 25

C.F.R- § 178.5.

20

cerned with the frame of mind of the alleged wrongdoer.

€.9., Ernst & Ernst v, Hochfelder, 425 US. 185 ( 1976). The

Court of Appeals would ignore that history

f development

and force the definition of a

“security” into a formalism

this Court has consistently rejected.

IT]

REVIEW SHOULD BE GRANTED TO CONFIRY

TRUST PROTECTIONS PROVIDED TO AMERICAN

INDIANS BY AN ACT OF CONGRESS

The lower court's handling of the

ny the inter-related trust

Indian law issues threatens the rights of all dependent Na

tive populations, whether in Trust status, in experimental

programs like termination or in protectorates like the Pa

cific or Caribbean regions. That effect follows from ( 1) the

assumption that the

Te rmination Aet was a mandate from

Congress to abandon thie historic poltey Of protection of

Indians and their property and (2) the reduction of the

question of breach of trust +

i) the "orood faith’ question

With full knowledge. cons

other thinking observer of ¢)

monly held land hiease ix the f

Hon to themselves and to any

e American seene, that con

; } , , .

(Hilapmental MMaredic yt oft th

Indian wav of life. the Bank implemented the sale of Pet

toners’ only remaining land for noe considerat

i lion other than

the monetary one: and failed te rm quire a current monetary

value even at that. Corr latively, every sensitive observer

knew that the dolla Was the /east

V

inportant element to the

‘)

Indian, but the Bank failed to even consider the unique

= Indian wards attach to lend ownership,

The language of the

cultural values it

termination act, and the trust agree-

hient itself,?* directed preservation of the mixed bloods’ as-

**The trust agreement, Exhibit 98. provided in Article II:

eclares that it is his purpose in establishing

objective of the Government of the

The trustor hereby d

this trust to give effect to the

sets. Moreover, Congress directed assistance to the mixed-

bloods in adjusting to their new status, and conferred rights

on them equivalent to non-Indian citizens after termination.

All of those protections were effectively nullified.

If rights of Indians ean be thus eliminated in a social

experiment such as termination, then the same threat will

follow any effort to devise new policies for Native Ameri-

cans dqnywhere, Programs for the allotment of Indian lands

in severalty, competency laws and proceedings, as well as

tribal leasing programs, are among the diverse policies and

programs where the precedent of this case poses tragie econ-

Sequences,

A. The Conclusion that Congress Ahandoned the Protec-

tions for Indians and their Prop rtyu Contliets with

Opinions of this Court and the Court of Claims on the

Effect of Termination.

The Court of Appeals affirmed, without comment, the

conclusion of the trial judge that in termination “Congress

Was pursuing the removal of trust restrictions from. the

management of Indian property... rather than the tight-

ening of restrictions and redoubling of supervision by a

trustee, be it government or bank.” (App. Cy p. 133.) The

Court of Appeals thus declined to consider the protection

of any rights under Indian law, including the “private

treaty” right. The holding reverses the policy towards In-

dians mandated by the Commerce Clause (sce U.S. Const.,

United States to terminate the governmental supervision of the mem-

bers of the mixed-blood members of the Ute Indtan Tribe in a man-

ner whitch wall provide for those beneficiaries seeking and able to take

advantage of it, every opportumsty for assistance in becoming self-

reliant individuals, and which wll protect them against the improvs-

dent dissipation or loss of their assets. [Followed by provisions direct-

ing assistance in acquiring “real property for farm or business.” ]

(Emphasis added. )

22

art. I, | 8, cl. 3) and having its origin in Article IIT of the

Northwest Ordinance of 1787 [reenacted at 1 Stat. 51

(1789) ]. While Congress may have that power, the courts

err when they imply such a purpose.

The holding that Congress reduced the Indians’ rights

to protections in the termination laws confliets, moreover,

With numerous recent decisions of the Court of Claims,

Which has become the most important forum for the adjust-

ment of Indian rights. The Court of Claims has recently

held, ina related context, that “once having... assumed the

task of terminating the [Creek | Nation’s mode of life in-

cluding its manner of holding its lands... it was ineumbent

upon the United States to take every conceivable precau-

tion to insure that the Creek Nation did not suffer the loss

of any of its lands.” Vanktown Siow Tribe v. United Stat Ps

625 F 2d 159, 164 (Ct. Cl. 1980). When the Indians of the

Northwest claimed that termination amounted to an implied

taking of their lands, the Court of Claims held that “the

Congressional history indicates otherwise.”

It shows that Congress was concerned with and aware

of all of the Indians’ interests and rights, and tried

to satisfy them without harm to either the withdraw-

ing or remaining members .

Klamath and Modoc T) ies o. Lopate dl Stati & 436 io Jd 1008,

1020-21 (Ct. Cl. 1971), cert. denied, 404 US. 950 (1971).

B. The “Private Treaty” Protection Provided hy Congress

in the Termination Act was Tqnored by the Bank. and

Changed hy Administrative Inte rpretations of BIA,

The principal mnethod directed by Congress to assure

that, in the words of Yanktown Siour, the mixed-blood

group “did not suffer the loss of any of its lands.” while

they adjusted to a new social/economie status for which

everyone knew they were poorly equipped, was the so-called

23

O77n, Supra, and App. By

p. 149) a simple option for the individual “members” in

either group to acquire enough rights to operate a farm or

ranch. ——

“private treaty?” (See USC.

Administration of the private treaty by the Bank, in its

capacity as trustee and transfer agent, was in faet the prin

eipal fiduciary duty contemplated by Justice Blackmun's

holding in Affiliated Ute at 406 US. 128, 152:

The bank itself had acknowledged, by letter to AUC

in January 1958, that “it would be our duty to see

that these transfers were properly made” and that,

With respect to the sale of shares, “the bank would be

acting for the individual stockholders.”

Nevertheless, the agreed facts and the findings of the trial

Judge are that the Bank purposefully acted to nullify Peti

tioners’ private treaty right” The Bank did so because the

BIA had decided to alter the meaning of

+} yt + “1t1

Thies PoPN cate rea

so that the Tribe (which was still under BIA p

aE :

could become a purchaser Phat necessitated altering the

The ‘private treaty” 1s discrssed in some detail in the findings of the

trial judge at App. B, pp. 36-42. The regulations ginally proposed that

fajny mixed-blood member of the tribe desiring to dispose of his interest in

any of the lands acquired under the terms of this

may do so by private treaty (See Exhibie 109

The tindings of the trial pudge are at App ©, pp 84-8

'

itis fairly certain that the Bank knew thar the tribe

wanted

trol, had the authorization of the United States to acquire ntrol

and that Interior and BIA interpretations of the Termination Act

and the regulations promulgated thereunder cleared the way for the

acquisition of control

The trial judge specittcally determined at App

The tribe was not a member of the tribe nd thus could

tially purchase range mpany shares but ild

an offer had been made to individu

full- bloods

The trial judge further tound at App. C. py i. that the BIA

change the plain meeting of the words used by Congre

24

private treaty Congress granted only to individual “mem-

hers,” so that “member” meant “Pribe™ and wof its individ-

ual members. BLA resolved to make that change without

the knowledge or approval of Congress, by administrative

interpretation,

The Bank then acceded to BEA instructions “to pro

ceed with the purchase by the tribe” (App. Cop. 49.) Pur

chase by the Tribe did not satisfy the purpose of the pri

vate treaty, however, which was to enable individual Indians

In both groups to assemble an economic mit. To the con

trary, it defeated that purpose,

Phoughtful persons of good willmay ditfer in the ropin

ions about the wisdom of BEA’s rewriting the private treaty.

As the termination policy proved to be a failure, and it be

came clear that segregating the Utes’ property 6 chts would

be as destructive as it had been to the Five Civilized Tribes

under the allotment poliev, it is understandable that BIA

wanted to aequire the mixed -bloods”* share of the range and

restore it to a conununal status. The mixed-bloods were no

is

lonyver the responsibrhty of BEAL and at that point in time

had the Bank to look after their interest

It was for Conyre however, and not BLA to make t)

deter nation to chan: e private tf if Chis Court has

heen clear that

t i tie iberevatk { ranted ? im ad nistra

tive uyens harged ! This ! ! ration of a fed

ri Peatiite root TH } \ riith iw. Rath t

! OW i reviilutions ft arr nte ef

! t Thre Vil ‘ ! \ ~ wat } thre th

25

297 U.S. 129, 134 (1936). To the same effect, sec Ballinger

v. Frost, 216 U.S. 240, 249 (1910):

Whenever, in pursuance of the legislation of Con-

gress, rights [ot an Indian] have hecome vested it

becomes the duty of the courts to see that those

rights are not disturbed by any action of an execu-

tive officer, even the Secretary of the Interior, the

head of a department. However laudable may be the

motives of the Secretary, he, as all others, is bound

by the provisions of Congressional legislation,

the Court of Clans has held that fathure to follow the

statutory procedure in the termination of a tribe's ranch

eria status is a breach of fiduciary duty. 0. So +. Diunean,

667 F. 2d 36 (Ct. Cl. 19S2), pe fition tor cert. tiled, SL US.

L.W. 3025 (ULS. Mar. 19, 1982). Petitioners’ claims that

failure to entertain the competing offers, or to preserve

the private treaty, amounted to a breach of trust) were

nevertheless brushed aside by the Court of Appeals with the

cryptic observation that “we can see no useful purpose in

considering such an offer... in view of the rejection of

[the Margaret Sprouse’ bid) and the reasons for its re

jection.” (App. A, p. 23.)

In response, we echo this Court's comment in Arenas v.

United States, 822 US. 41%. 427 (1944): 1f the Indians were

not to be afforded protections under the Act, and those pro-

tections were to be avatlable only to the Tribe, why send

yovernment agents to the reservation to hold out that prom-

ise? Why the elaborate system of notice, to the individual

members, of each proposed sale and of the first refusal

option? (See App Rly loa.) Why the speeifie provisions

concerning terminated Utes “in need of assistance” if Con-

ress had no intention to prate et them?

As this Court has said in a related context “{t|he sta-

tute’s foeus on the individual is unambiguous” and “the

26

question of fairness to various classes affected by the sta-

tute [such as the Tribe] is essentially a matter of poliey for

the legislature to address." City of Los Angeles v. Man-

hart, 485 US. 702 (1978). As the Court of Appeals for the

Ninth Circuit has said:

In his dealing with the Indians, the Secretar¥ of

Interior does not have the power of an asiatie poten-

tate or even of a benevolent despot. He, like his wards

themselves, is subject to legislative restrictions.

United States +, Arenas, 15S F.2d 730, 747-48 (9th Cir. 1947},

cert, dented, 331 U.S. 842. Cf. United States v. Top 0 ASSO-

cuttes, lnc. 400 US. OEE (1972) Arrcona ve. Maricopa Coun

ty Medical Society, V2 S. Ct. 2466 (1982).

The Bank was to have acted in the interest of the mixed

bloods. (406 TUS. P28, 152.) Tt abandoned that clear fidu-

mary duty when it cooperated in the elimination of the pri-

vate treaty for the benefit of the Pribe, which was not a

trust benefielary.

Co. Presumption of Good Faith, in Liew of “the punctillio

of an honor the most sensitive.” Denies the Protections

of Trust Law to Petitioners and Their Property and

Does So Because They are Indians.

The Court of Appeals responded to Petitioners’ objec

tion that there was no evidence to support the conclusion

that $1,100 per unit represented the fair value of their re-

spective interest in the range by holding, that “{t|he

trial court found that the Bank did not act smprudently in

utilizing the Moore appraisal.” (App. A, p. 2.) (Emphasis

added. )

The effect was to substitute the ordinary requirement

of evidewee ff calue for a test in which the fiduciary is ex-

cused if it acted in “good faith.” The “good faith” test,

moreover, Was applied as a presumption, for no evidence

27

was taken at trial or cited by the Court of Appeals sup-

porting the conclusion.

The trial court directly responded to Petitioners’ objee-

tions in a written opinion declaring that if the United States

had executed similar sales, “the appropriate inquiry | would

be] whether the government had made ‘a good faith effort

to give the Indians full value of their lands’ (App. D, p.

132.) “{[FE]ven under the standards made applicable to the

United States,” the trial judge continued, “the disputed

transactions were {not| beyond the lawful exercise of the

bank’s powers,’ /d. pp. 132-133, citing Lone Wolf v. Hitch-

cock, AST U.S. 553, 568 (1903) and United States vr. Sion

Nation, 448 U.S. 371, 416 (1980).

The holding is clear error and a destruction of trust

protections available to American Indians, as follows:

1. The holding is a misapplication of Lone Wolf, having

the effect of extending elements of sovereign immunity to

an ordinary commercial trustee if the trust beneficiaries

are Indians. Justice Blackmun was clear in Srouwr Nation

that the “good faith” standard applied only because of the

implications of sovereign immunity." When Mr. Justice

White wrote in Lone Wolf that “|wje must presume that

Congress acted in perfect good faith in the dealings with

the Indians, and that the legislative branch of the govern-

ment exercised its best judgment in the premises,” he did

not do so because the petitioners were Indians, as the courts

below assumed — but because the United States was sover-

eign and the question was a “political’’ one for Congress.

There is no reason to believe that when Congress directed

*8Justice Blackman explained that the views of the Court in Lone Wolf

were based, in part, on a holding that “Congress possessed full power in the

matter,” * * * [but] “where Congress waives the Government's sovereign im-

munity . . . there would be far less reason to apply Lone Wolf's principles of

deference.” 448 U.S. 371, 412-14.

OR

the establishment of trusts it intended the trustee to have

the powers of sovereign.

2. The substitution of a “good faith” standard, merely

hecause Petitioners are Indians, denies them the protec

tion of the law of trusts. The classic standard of care ton

commercial trustees is that announced by Justice Cardozo,

of “{niot honesty alone, but the punetillio of an honor the

most sensitive.” VWermhard «. Salmon, P49 N.Y $58, 164

N.B. 945, 5946 (1928). This Court has consistently applied

that standard SEC ¢. Capital Gains Research Bureau, Tn

ofa U.S. 180, 194 (1963 See al Hlerman & Mecleay

Huddleston, US 7m PS... HOD LS and

United States Naftalin. 441 U.S. 768 (1979)

The “good faith’ standard applied by the Court of Ay

peals Is, moreover, a misstatement of the standard even in

cases involving the United States as trustee, where the ques

tion of Immunity is not an issue, In that event, “all sales

must "he based upon a consideration of the needs and the

hest interests of the Indian owner and his heirs’ and they

are entitled to “the greatest appropriate revenue whicl

should have heen obtained.’ U7. S Mitchell, 664 F. 29d 26h,

271 (Ct. Cl. 1982) cert. granted. 5OUS.L.W. 39638 (U.S. Jun

7. 1982). The precise standard of “reasonableness” applied

by the Court of Appeals herein has been rejected in that

context:

Defendant's theory is that... its actions were rea

sonable, and not a breach of trust... . that theory

must fail... the standard of duty for the United

States is not mere “reasonableness,’’ but the highest

of fiduciary standards.

U.S. v. Duncan, 667 F. 2d 36 (Ct. Cl. 1982), petition for

cert, filed. 51 U.S.L.W. 3023 (U.S. Mar. 19, 1982). “[ A]

showing that the value realized from the trust property

was so far below its fair market value as to constitute

29

fraudulent conduct, gross negligence, or other breach of

fiduciary duty will suffice without more to establish the

trustee’s liability” Coast Indian Community v. United

States, 500 F. 2d 639, 653 (Ct. Cl. 1977).

* . * *

Lone Wolf and Sioux Nation simply have no relevance

to the inquiry. Application of those cases herein has the

effect of imposing new and different trust standards where

the trust beneficiary is an Indian and extending the powers

of sovereign immunity to an ordinary commercial fiduciary

established for Native Americans. Nothing in the termin

ation law would even suggest such a result, and it is a firm

ly established doctrine that elimination of the protective

provisions of Indian law may not be lightly inferred. F.@.,

Menominee Tribe v. United States, 391 U.S. 404 (1968) and

vases collected there. It is irreconcilable, as well, with the

historic, Constitutional, policy of this Nation towards In-

dians dating from the Northwest Ordinance of 1787.

D. A Presumption of Value Violates Fundamental Di

Proces $.

The lower court’s handling of the interrelated questions

of breach of trust and value has the further effect of dens

ing these Indians the fundamentals of due process, for

these Indians must accept a presumption and a pre

sumption not even of value, but of “good faith.” That

presumption, moreover, was based upon outdated apprais

als, prepared for vastly different purposes, which are not

even in evidence.

Yet, with the uncontroverted testimony before it, stipu-

lated as to its qualifications, establishing a value in excess

q

of 400% of the amount Petitioners were paid,” the court

below declined to address the problem.

*%See note 10, Supra.

30

CONCLUSION

Because of the Court of Appeals decided no issues other

than that the Bank had no “duty”? under Rule 10b-5, and

that there was no “fiduciary relationship” between the

mixed-bloods and the Bank, both of Which were decided

otherwise by this Court in Affiliated (te, the decision of

the Court of Appeals should be stuminarily reversed,

In the alternative, this case should be remanded to the

trial court, with or Without hearing, for further proceed

Ings consistent with Affiliated Ute.

Any other result threatens the integrity of the judicial

sVstem,

Respectfully submitted,

Parker M. Nielson

Hod South ZOO Kast

P.O). Box SL0719

Salt Lake City, Utah S415]

Adam M. Dunean

426 WNennecott Building |

Salt Lake City, Utah 84132

Paul T. Moxley

OLS Kearns Building

Salt Lake City, Utah 84101

Attorneys for Py titioners

John J. Flynn

994 Military Drive

Salt Lake City, Utah 84103

Of Counsel