On March 26, 2018 the U.S. Supreme Court declined to hear an appeal by two objectors for review of the Court of Appeals for the District of Columbia Circuit May 16, 2017 ruling, which affirmed the U.S. District Court’s April 20, 2016 decision approving the plan for distribution of $380 million in unclaimed “cy pres” funds from the historic 2011 settlement of Keepseagle v. Vilsack, Case No. 99-cv-3119 (DDC) (EGS), a nationwide class action and decades-long battle to resolve claims that the U.S. Department of Agriculture systematically discriminated against Native American farmers and ranchers, allowing for the final distribution of those funds.

In late May 2018, in accordance with the April 20, 2016 distribution plan and following the distribution of approximately $238 million for successful claims in 2012, a supplemental award of $18,500 was paid to each prevailing claimant, along with payment of $2,775 to the IRS on their behalf, to offset taxes owed, accounting for over $76 million of the remaining cy pres funds.

On July 19, 2018 Judge Emmet G. Sullivan of the U.S. District Court for the District of Columbia, also in accordance to the April 20, 2016 plan, approved $38 million in cy pres awards to be immediately paid out to 34 non-profit organizations serving Native American farmers and ranchers, which were recommended following a rigorous grant-making process.  Pursuant to the April 20, 2016 modification of the settlement, $266 million, the remainder of the unclaimed funds, go to the Native American Agriculture Fund, a trust created as part of the settlement modification, and empowered to fund Native American agricultural programs through non-profit organizations over the next 20 years. 

Case Background and Significance

Keepseagle v. Vilsack, Case No. 99-cv-3119 (DDC) (EGS), U.S. District Court for the District of Columbia, a nationwide race-based discrimination class action lawsuit was filed more than 19 years ago, on the eve of Thanksgiving 1999.  The plaintiffs alleged that since 1981, the USDA denied Native American farmers and ranchers, nationwide, the same opportunities as white farmers to obtain low-interest rate loans and loan servicing, causing them hundreds of millions of dollars in economic losses.

On April 28, 2011, the U.S. District Court granted final approval of a historic settlement of $760 million between Native American farmers and ranchers and the USDA. The Keepseagle settlement agreement required USDA to 1) pay $680 million in damages to thousands of Native Americans, to 2) forgive up to $80 million in outstanding farm loan debt, and to 3) improve the farm loan services USDA provides to Native Americans.

The settlement agreement approved by the Court is an extraordinary result: according to an expert report prepared for the plaintiffs by a former USDA economist, the settlement’s $760 million in monetary relief represents about 98% of what the plaintiffs could possibly have won at trial. 

“Final approval of the Keepseagle settlement marks the end of an unfortunate chapter in our nation’s history where USDA’s credit discrimination against Native Americans was the norm.  Under this settlement, Native American farmers and ranchers will finally receive the compensation and justice they deserve, and we will undertake a process to ensure that the USDA treats Native Americans equally and fairly,” said Joseph M. Sellers, Lead Counsel for the Plaintiffs’ class and Chair of Cohen Milstein’s Civil Rights & Employment practice. “This case is also especially noteworthy as it represents a successful effort by Native Americans, who understandably regard the United States government with mistrust as a consequence of the mistreatment they received for centuries, to use the judiciary of the United States to hold a major agency of the United States accountable for violations of laws of the United States,”

Presiding U.S. District Judge Emmet G. Sullivan, praised counsel, saying, "It's probably the best negotiated agreement that this court has seen in its experience...the terms of this settlement are historic," and "[Cohen Milstein has] demonstrated the highest level of skills and professionalism."

  • Background on the Claims Process

Under the April 29, 2011 approved settlement agreement, Native American farmers and ranchers had until December 27, 2011 to file claims for damages and debt relief.  Keepseagle class members had an option to file individual claims under one of two tracks.  Track A permitted eligible class members to recover up to $50,000 by providing information under oath that they are Native Americans, that they farmed or ranched (or attempted to farm or ranch) between 1981 and 1999, that they sought a loan or loan servicing from USDA during that period, and that they complained when they were denied a loan or otherwise treated unfavorably.  Track B permitted eligible class members to seek an award of damages up to $250,000, with the amount based upon evidence of their actual economic loss.  Track B claims had to include evidence that could be admissible in court to satisfy each of the same elements as Track A, and in addition had to identify a similarly situated white farmer who received more favorable treatment.

As a part of the claims process, starting in July 2011, class counsel conducted a series of meetings to assist Native American farmers and ranchers with filing claims under Track A.  These meetings occurred throughout Indian Country from July through December 2011.  Class members were encouraged to retain individual counsel for Track B claims. Claims for both tracks were reviewed and approved by a neutral adjudicator.

After this extensive outreach campaign and claims process, which resulted in over 4300 completed claims, over 3600 were approved for payment in 2012.  Successful Track A claimants, the vast majority of the claimants, received $50,000 directly, plus $12,500 paid to the IRS on their behalf to offset taxes.  As noted previously, Track B claimants received up to $250,000, based upon their actual economic loss. 

  • Additional Provisions Related to the Original Settlement

Under the original settlement agreement and in addition to payment of monetary damages, the USDA also would forgive up to $80 million in debt that was currently held by class members and whose claims were approved under Track A or Track B.  When the U.S. District Court granted preliminary approval of the settlement in November 2010, that order put into effect a moratorium on foreclosures, debt accelerations and debt offsets not already referred to the U.S. Treasury Department.  The moratorium applied to all Native American farmers and ranchers, and for those who filed Track A or Track B claims the moratorium lasted until the claims process concluded.  

The third provision of the settlement agreement called for the USDA to improve the delivery and responsiveness of its farm loan program to Native American farmers and ranchers.  One of the most important provisions was the creation of the Native American Farmer and Rancher Council, a new federal advisory committee housed under the USDA. The Council has 15 members, 11 of whom are Native American or represent Native American interests and four of whom are top USDA officials.  The Council meets at least twice a year, and was guaranteed to continue for at least five years after the settlement approval to discuss how to make USDA’s programs more accessible to Native Americans farmers and ranchers.  The Council reports its recommendations directly to senior USDA officials.

In addition to establishing the Council, the USDA was required to take the additional steps to improve its services: 1) create 10 to 15 USDA regional sub-offices that would provide education and technical assistance to Native American farmers and ranchers and their advocates; 2) undertake a systematic review of its farm loan policies to determine how its regulations and policies can be reformed to better assist Native American farmers and ranchers; 3) create a customer guide on applying for credit from the USDA; 4) create the Office of the Ombudsperson to address concerns of all socially disadvantaged farmers and ranchers; and, 5) regularly collect and report data on how well Native Americans fare under USDA’s farm loan programs.

  • Cy Pres Funds

The original 2011 settlement provided that any unclaimed funds would be distributed to non-profit organizations serving Native American farmers and ranchers, referred to as a “cy pres” distribution. No party appealed this provision in the Final Order and Judgement, Keepseagle v. Vilsack, No. 99-cv-3119 (D.D.C. April 29, 2011), JA 592-93.

After an extensive outreach campaign and claims process was conducted in 2011, which resulted in over 4300 completed claims, of which over 3600 were approved for payment in 2012.  Successful Track A claimants, the vast majority of the claimants, received $50,000 directly, plus $12,500 paid to the IRS on their behalf to offset taxes.  Track B claimants received up to $250,000, based upon their actual economic loss.  Of the original $760 million settlement, this claims process left $380 million undisbursed.

Years of negotiations on how to distribute the unclaimed $380 million followed, and on April 20, 2016 the U.S. District Court approved an addendum to the original settlement agreement, reflecting a compromise between two competing goals: paying out more funds to claimants who successfully recovered through the claims process, and maintaining the cy pres distributions for the benefit of the class as a whole. 

Under this addendum or modified settlement, a supplemental award of $18,500 would be paid to each prevailing claimant, along with payment of $2,775 to the IRS on their behalf, to offset taxes owed.  (Those checks were mailed in late May 2018, and accounted for over $76 million of the remaining funds.)  Another $38 million was to be awarded non-profit organizations serving Native American farmers and ranchers based on recommendations from Class Counsel, while the remaining funds, approximately $266 million, would be used to create a Trust, the Native American Agriculture Fund.

  • Appeal of the Cy Pres Funds

Two claimants, subsequently appealed to the U.S. Court of Appeals of District of Columbia Circuit asserting that the remaining $380 million should be distributed, pro rata, to successful claimants. On May 16, 2017 the three-judge Court of Appeals panel ruled 2-1 in favor of the U.S. District Court’s modified settlement plan with one dissenting judge, who argued that any remaining unclaimed money be returned to the federal Treasury. No judge voted in favor of the argument made by the two appellants.

As a result, the Court of Appeals May 16, 2017 ruling affirmed the U.S. District Court’s April 20, 2016 decision approving the modifications of the original settlement agreement, allowing 1) each prevailing claimant to be paid an additional $18,500 to their previously approved settlements, along with $2,775 to be paid directly to the IRS, 2) $38 million to go to Native American agriculture non-profits, and 3) the remainder of the $380 million funds to go to the establishment of the Native American Agriculture Fund.

The two objecting plaintiffs who filed that appeal subsequently asked the Court of Appeals to re-hear the case en banc (with all judges participating instead of the usual three-judge panel).  On September 20, 2017, the Court denied this request for a re-hearing.  Subsequently, the two objectors filed a petition, asking the Supreme Court to hear the case.

On March 26, 2018 the U.S. Supreme Court declined to hear the two objectors’ appeal for review of the Court of Appeals for the District of Columbia Circuit May 16, 2017 ruling, which thereby affirmed the U.S. District Court’s April 20, 2016 decision approving the plan for distribution of $380 million in unclaimed cy pres funds, and thereby allowed such funds to be finally distributed and concluded the litigation.

  • $38 million in Initial Cy Pres Awards

The modified settlement allocated $38 million for distribution to non-profit organizations serving Native American farmers and ranchers through what was called the “fast track” process.  The grant opportunity was announced in spring 2016, with applications received in summer 2016, and recommendations from class counsel, developed with the assistance of an Advisory Committee, were submitted to the U.S. District Court in October 2016.  Those recommendations were on hold until the appeals process was completed in the spring of 2018, and on July 19, 2018 the U.S. District Court approved the recommendations. 

Pursuant to the modified agreement, qualifying organizations had to have provided business assistance, agricultural education, technical support, or advocacy services to Native American farmers or ranchers prior to November 1, 2010, to support and promote their continued engagement in agriculture, and had to be a recognized non-profit organization, or an instrumentality of a state or federally recognized tribe.

The largest number of projects funded support infrastructure or large equipment purchases, ranging from irrigation projects, to purchasing large farm equipment to be shared by small producers, to building facilities needed to link producers to markets, while other projects focus on providing technical assistance or training.  Other approved proposals include regranting to smaller organizations, Community Development Financial Institutions (CDFIs) or similar institutions planning to make loans to farmers or ranchers, as well as addressing legal needs, public policy, or other advocacy on behalf of Native farmers and ranchers and providing scholarships or education to Native American students in agricultural fields.  A complete list of the projects approved for funding is available here.

Given the great need for resources to support the significant interest in agriculture, the remainder of the settlement funds, currently amounting to approximately $266 million, will go to fund the Native American Agriculture Fund.  This Trust will be the largest philanthropic institution ever that is dedicated exclusively to serving the Native American community.  The Trust, under the leadership of a stellar group of Native American leaders in agriculture, economic development, and philanthropy, who were appointed as Trustees by the Court, and with its initial Executive Director Janie Hipp, will have up to 20 years to distribute funds to non-profit organizations providing business assistance, agricultural education, technical support and advocacy services to Native American farmers and ranchers, to support and promote their continued engagement in agriculture. 

  • Native American Agriculture Fund

Given the great need for resources to support the significant interest in agriculture, the remainder of the settlement funds, currently amounting to approximately $266 million, will go to fund the Native American Agriculture Fund.  This Trust will be the largest philanthropic institution ever dedicated exclusively to serving the Native American community.  The Trust, under the leadership of a stellar group of Native American leaders in agriculture, economic development, and philanthropy, who were appointed as Trustees by the Court, and with its initial Executive Director Janie Hipp, will have up to 20 years to distribute funds to non-profit organizations providing business assistance, agricultural education, technical support and advocacy services to Native American farmers and ranchers, to support and promote their continued engagement in agriculture.  The Native American Agriculture Fund website can be found here.

Plaintiffs are represented by Cohen Milstein Sellers & Toll, PLLC; Conlon, Frantz & Phelan; Jenner & Block, LLP; Sarah Vogel and The Law Office of Phil Fraas.