Breach of Fiduciary Duty

Federal Claims Court cites Brattle Academic Advisor’s report in awarding $21M to the Jicarilla Apache Nation.

Background

The Bureau of Indian Affairs (BIA), a department of the federal government, has historically held funds in trust for the Jicarilla Apache Nation (the “Nation”) and is responsible for the financial management of these trusts. In 2002, the Nation sued the U.S. government for monetary loss and damages related to the government’s breach of fiduciary duty in mismanaging the Nation’s trust assets and other funds between 1974 and 1992. In its complaint, the Nation alleged that the BIA breached its fiduciary duties to the Tribe by imprudently investing the Nation’s funds. The Nation claimed that, among other things, the BIA invested virtually all of Jicarilla’s tribal trust funds in securities with maturities of one year or less, even though this approach was not prudent or suitable given the Nation’s circumstances and needs.

Brattle’s Role

Holland & Knight, counsel for the Jicarilla Apache Nation, engaged experts at The Brattle Group to support Professor Michael Goldstein, a Brattle academic advisor, in his response to Government arguments that the BIA managed the funds prudently. Specifically, Professor Goldstein filed two reports on behalf of the Nation rebutting the findings of the government’s testifying expert – especially with regard to the alleged liquidity needs of the Nation and the government expert’s assessment of the fund’s performance over the period. Senior associate Matthew Aharonian worked with Professor Goldstein to properly frame the issues involved, and led a team at Brattle to implement analyses that provided the foundation for Professor Goldstein’s opinions. Dr. Aharonian was also responsible for Brattle’s additional litigation support of both Professor Goldstein and counsel at Holland & Knight.

The Outcome

On June 24, 2013, the United States Court of Federal Claims Court found that the United States federal government grossly mismanaged the funds of the Nation and awarded damages in the amount of more than $21 million.

Judge Francis Allegra agreed with Brattle’s expert, Professor Goldstein, on several key points, noting that:

• “[I]n his report, Dr. Goldstein indicated that his model demonstrated that “a substantial portion of the trust monies could have been invested in longer-term maturities, with little-to-no risk of pre-mature liquidation.”

Judge Allegra further cited Professor Goldstein’s report to support his finding that the government’s analyses of the fund’s performance shed little light on the prudence of the investments made by the BIA, and that these analyses contained material calculation errors.