Arizona tribes have the right to sue the federal government for allowing a major developer to default on payments it was supposed to make to obtain the old Phoenix Indian School, a federal appeals court has ruled.
The three judge panel said the Inter-Tribal Council of Arizona presented enough information to show there is evidence that the federal government failed to maintain sufficient financial security to deal with what would happen if the Barron Collier Co. defaulted on its payments. That was important because the state’s senators, in getting Congress to approve the deal, insisted that the funds be used for education of Native-American students.
As it turned out, the company did default, leaving the trust fund that was set up about $20 million short, according to attorney Melody McCoy who represents the council.
A trial judge in Washington tossed out the tribes’ claims. But the Court of Appeals for the Federal Circuit concluded there was enough of a basis to support a claim that the federal government failed in its duty to protect the trust.
The ruling does not guarantee that the tribes will win. But it does get them their day in trial court unless the government gets it overturned on appeal.
There was no immediate response from the Department of Justice.
The new ruling is the latest in what has been a complex set of dealings after the federal government, as part of a larger movement, decided to close the 99-year-old boarding school in 1990.
All this came as the federal government was interested in about 108,000 acres of wetlands that Collier owned in the Florida Everglades. So the deal valued at about $122 million was for Collier to get most of the Indian school property in exchange, along with a commitment by the company to pay $34.9 million in cash, which was supposed to represent the difference in value.
Collier eventually swapped 57 acres of the site with the city — what would become part of the existing park — in exchange for land in downtown that eventually became the Collier Center. The deal ultimately provided land to both the Department of Veterans Affairs to expand the Phoenix VA Hospital and the state for what became a nursing home.
And Collier kept 15 acres for future development at the site on Indian School Road and Central Avenue that was never developed.
Where it ran into problems was that the $34.9 million was supposed to be made in 30 annual payments which were supposed to be secured by the value of Collier’s 15 acres on the site and about 7.5 acres downtown.
Ultimately, though, Collier defaulted. And McCoy said while the government did eventually get back some of what was still owing, it still left the trust account short $20 million.
The new ruling now allows the tribes to pursue the federal government for failing to ensure that the property securing the amount owed would have been enough to cover the balance.
McCoy said the land swap deal was significant because it was the first time in the nation, as boarding schools were closed, that Congress insisted that the local tribes actually see a financial benefit. More to the point, the money raised — the tribes get to tap the interest — supplements federal dollars they already get and cannot be used to offset that aid.
“The land exchange was only approved because Congress set up these trust funds,” she said. “Otherwise the Arizona delegation would not have approved the land exchange.”
Basically, she said, the federal government got what it wanted, Collier got what it wanted and the city got the park.
“The tribes did not get what Congress mandated,” McCoy said, which is why “it just gripes the tribes” that the government never lived up to its part of the deal to ensure that Indian education got the dollars it was promised.
“Right now we’re just happy that these Court of Appeals judges seem to understand that we have a legitimate claim,” she said. “We look forward now to getting an opportunity to resolve that.”