William D. Temko, CA Bar #98858 MUNGER, TOLLES & OLSON …Jul 31, 2019 · PLEASE TAKE NOTICE that...

Southcentral Foundation v. ANTHC Case No. 3:17-cv-00018-TMB

William D. Temko, CA Bar #98858 MUNGER, TOLLES & OLSON LLP 350 South Grand Avenue, 50th Floor Los Angeles, CA 90071-1560 (213) 683-9266 [email protected] Louisiana W. Cutler #9106028 Katherine Demarest #1011074 DORSEY & WHITNEY LLP 1031 West Fourth Avenue, Suite 600 Anchorage, AK 99501-5907 (907) 276-4557 [email protected] [email protected] Attorneys for Plaintiff Southcentral Foundation

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ALASKA

Southcentral Foundation,

Plaintiff,

vs.

Alaska Native Tribal Health Consortium,

Defendant.

Case No. 3:17cv-00018-TMB

MOTION AND MEMORANDUM IN SUPPORT OF MOTION FOR SUMMARY

JUDGMENT (FED. R. CIV. P. 56)

Case 3:17-cv-00018-TMB Document 31 Filed 08/16/17 of 48

mailto:[email protected]

mailto:[email protected]

i Southcentral Foundation v. ANTHC Case No. 3:17-cv-00018-TMB

TABLE OF CONTENTS

Page

NOTICE OF MOTION AND MOTION .........................................................................................1

I. INTRODUCTION ...............................................................................................................1

II. LEGAL BACKGROUND ...................................................................................................4

A. The Provision of Health Services to Alaska Native Peoples is Founded on Consensus and Transparency ...................................................................................4

B. Section 325 and the Creation of ANTHC ................................................................5

III. FACTUAL BACKGROUND ..............................................................................................8

A. Teuber’s Scheme to Drastically Increase His Compensation ..................................8

1. The Chairman/President Position Was Intended to Be a .................................................................8

2. ANTHC ...............................................................................9

...........................................................................................9

...............................................................................11

....................................................11

.........................13

3. ...................................................................................................15

B. The Creation of the Illegal Executive Committee to Ratify Teuber’s Outrageous Compensation Package .......................................................................17

1. The Creation of the Executive Committee at the December 2014 Meeting ......................................................................................................17

2. The Executive Committee Increases Teuber’s Salary ...............................20

C. SCF Protests the Violations of Section 325 ...........................................................21

1. SCF Expresses Concern that the Executive Committee Is Illegal .............21

2. Teuber Stifles SCF’s Proposed Bylaw Amendments ................................23

3. Executive Compensation Continues to Be Decided by the Illegal Executive Committee .................................................................................23


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D. ANTHC Responds by Limiting the Information that Designated Directors Can Share with their Congressionally Appointed Designating Entities ................24

1. The January 2016 .................................................................24

2. The ANTHC Code of Conduct ..................................................................25

3. The Disclosure Policy ................................................................................27

E. The Current State of Affairs ..................................................................................28

1. SCF Makes Incremental Progress on Executive Committee Issues ..........28

2. SCF and ANTHC Begin Negotiating Confidentiality Agreement ............29

3. SCF Brings Suit to Declare Teuber’s Power Grab Illegal .........................29

IV. STANDARD OF REVIEW ...............................................................................................30

V. ARGUMENT .....................................................................................................................31

A. The Plain Language of Section 325 Mandates that All Decisions Be Made by the Full Board of Directors and Prohibits Information Sharing Restrictions ............................................................................................................31

1. Section 325 Prohibits Delegating the Power of the Board to the Executive Committee .................................................................................31

2. ANTHC’s Restrictions on Information Sharing also Violate Section 325.................................................................................................33

B. Legislative History of Section 325 Confirms Its Plain Language .........................34

1. The Senate Report Confirms Section 325’s Plain Language .....................34

2. The Stevens Letter Fully Supports the Senate Report and Section 325’s Plain Language .................................................................................35

C. Alaska Nonprofit Corporation Law Is Not to the Contrary ...................................36

1. Section 325 Preempts Alaska Nonprofit Law ............................................36

2. Delaware Corporate Law Fails to Take the Special Considerations of Section 325 into Account ......................................................................38

3. ANTHC Misapprehends SCF’s Theory of Fiduciary Duties .....................39

D. The Controversy Is Justiciable ...............................................................................41

VI. CONCLUSION ..................................................................................................................41


iii Southcentral Foundation v. ANTHC Case No. 3:17-cv-00018-TMB

TABLE OF AUTHORITIES

Page FEDERAL CASES

Altria Grp., Inc. v. Good, 555 U.S. 70 (2008) ...................................................................................................................36

Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) .................................................................................................................30

Broad v. Sealaska Corp., 85 F.3d 422 (9th Cir. 1996) .....................................................................................................37

C.A.R. Transp. Brokerage Co. v. Darden Rests, Inc., 213 F.3d 474 (9th Cir. 2000) ...................................................................................................31

Celotex Corp. v. Catrett, 477 U.S. 317 (1986) .................................................................................................................31

Chrysler Corp. v. Brown, 441 U.S. 281 (1979) .................................................................................................................35

City of Mesquite v. Aladdin’s Castle, Inc., 455 U.S. 283 (1982) .................................................................................................................41

Cook Inlet Treaty Tribes v. Shalala, 166 F.3d 986 (9th Cir. 1999) ...................................................................................................41

Fernandez-Ruiz v. Gonzales, 466 F.3d 1121 (9th Cir. 2006) .................................................................................................34

Freeman v. Arpaio, 125 F.3d 732 (9th Cir. 1997) ...................................................................................................31

Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167 (2000) .................................................................................................................41

Johnson v. Consumerinfo.com, Inc., 745 F.3d 1019 (9th Cir. 2014) .................................................................................................34

Keenan v. Allan, 91 F.3d 1275 (9th Cir. 1996) ...................................................................................................31

McClellan v. I-Flow Corp., 776 F.3d 1035 (9th Cir. 2015) .................................................................................................36

N. California Dist. Council of Laborers v. Pittsburg-Des Moines Steel Co., 69 F.3d 1034 (9th Cir. 1995) ...................................................................................................32


iv Southcentral Foundation v. ANTHC Case No. 3:17-cv-00018-TMB

Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099 (9th Cir. 2000) .................................................................................................31

Royal Foods Co. v. RJR Holdings, Inc., 252 F.3d 1102 (9th Cir. 2001) .................................................................................................32

Seminole Nation v. United States, 316 U.S. 286 (1942) ...................................................................................................................4

Summers v. Teichert & Son, Inc., 127 F.3d 1150 (9th Cir. 1997) .................................................................................................31

Tohono O’odham Nation v. City of Glendale, 804 F.3d 1292 (9th Cir. 2015) .................................................................................................37

United States v. Concentrated Phosphate Export Assn., 393 U.S. 199 (1968) .................................................................................................................41

United States v. Fei Ye, 436 F.3d 1117 (9th Cir. 2006) .................................................................................................32

United States v. Gallegos, 613 F.3d 1211 (9th Cir. 2010) .................................................................................................32

Walsh v. Enge, 154 F. Supp. 3d 1113 (D. Or. 2015) ........................................................................................41

Whistler Investments, Inc. v. Depository Trust & Clearing Corp., 539 F.3d 1159 (9th Cir. 2008) .................................................................................................36

Yang v. California Dep’t of Soc. Servs., 183 F.3d 953 (9th Cir. 1999) ...................................................................................................35

STATE CASES

Jerue v. Millett, 66 P.3d 736 (Alaska 2003).......................................................................................................38

McMullin v. Beran, 765 A.2d 910 (Del. 2000) ........................................................................................................39

In re Trados Inc. S’holder Litig., 2009 WL 2225958 (Del. Ch. July 24, 2009)............................................................................39

In re Trados Inc. S’holder Litig., 73 A.3d 17 (Del. Ch. 2013)......................................................................................................38

Weinberger v. UOP, Inc., 457 A.2d 701 (Del. 1983) ........................................................................................................38


v Southcentral Foundation v. ANTHC Case No. 3:17-cv-00018-TMB

FEDERAL STATUTES

18 U.S.C. § 16 ................................................................................................................................34

25 U.S.C. § 13 ..................................................................................................................................4

25 U.S.C. § 450 ................................................................................................................................4

25 U.S.C. § 450b ..............................................................................................................................4

25 U.S.C. § 450f ..........................................................................................................................4, 5

25 U.S.C. § 458aaa ..........................................................................................................................5

25 U.S.C. § 1601 ..............................................................................................................................4

STATUTES

Alaska Stat. § 10.06.305 ................................................................................................................37

Alaska Stat. § 10.06.960 ................................................................................................................37

Alaska Stat. § 10.20.111 ................................................................................................................38

Alaska Stat. § 10.20.191 ................................................................................................................38

Section 325 of Public Law 105-83......................................................................................... passim

RULES

Fed. R. Civ. P. 56, 30 .......................................................................................................................1


1 Southcentral Foundation v. ANTHC

Case No. 3:17-cv-00018-TMB

NOTICE OF MOTION AND MOTION

PLEASE TAKE NOTICE that Plaintiff Southcentral Foundation (“SCF”) hereby

moves this Court pursuant to Federal Rule of Civil Procedure 56 for entry of an order granting

summary judgment in favor of SCF. This motion is made upon the accompanying memorandum

of points and authorities, accompanying declarations and exhibits thereto, all other filings in this

case, any oral argument that the Court may hold, and any other information that the Court may

be inclined to consider.

I. INTRODUCTION

Congress authorized the creation of the Alaska Native Tribal Health Consortium

(“ANTHC”) in Section 325 of Public Law 105-83 (“Section 325”) in 1997 in order to provide an

effective voice to the Alaska Native people who directly benefit from the healthcare services

ANTHC provides at the Alaska Native Medical Center (ANMC). Section 325 built on a long

history of inclusivity, transparency, and cooperation among Alaska’s tribes and tribal

organizations by mandating that ANTHC “shall be governed by a 15-member Board of

Directors, which shall be composed of one representative” from specifically enumerated tribes

and tribal organizations, including Plaintiff Southcentral Foundation (“SCF”), thereby

empowering the tribal entities represented on the ANTHC Board to govern the Consortium.

Section 325 reinforced this mandate for open and cooperative governance by the tribal entities

represented on the ANTHC Board by providing that “[e]ach member of the Board of Directors

shall be entitled to cast one vote” and that “[d]ecisions of the Board of Directors shall be made

by consensus whenever possible.”

Congress created this structure because it wanted to draw on the expertise of the

Alaska Native regional health entities that had been providing services in Alaska for many years,

and also to provide an effective voice for people who directly benefit from services provided by

ANTHC. Through Section 325’s governance structure, the tribal entities represented on the

ANTHC Board are able to help ensure that (1) the ANMC services provided by ANTHC are

equitably delivered statewide, (2) the ANTHC Board adequately addresses all the different local

and regional health issues, interests, concerns, and obstacles faced by the tribal entities

represented on the ANTHC Board, (3) the ANTHC Board sufficiently allocates scarce financial

resources to ANMC services, (4) ANTHC’s financial status and business activities are

transparent, and (5) ANTHC executives and management are accountable.


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ANTHC began operation in 1999 and its corporate governance structure

functioned continuously and without any major problems for fifteen years. Suddenly, in

November 2014, Andy Teuber, ANTHC’s President and Chairman of the Board of Directors,

proposed amending ANTHC’s Bylaws to concentrate power in a loyal five-person Executive

Committee that could meet without notifying all ANTHC Directors and held virtually all of the

powers of the full Board. Teuber sought to do this so that he could use federal money received

by ANTHC to provide healthcare to Alaska Native people to increase his own compensation.

. Next, he split the jobs he held—President and

Chairman—into two positions, granting salaries to both, and then increased those salaries

dramatically. Then, without notice to the full Board, he had the Executive Committee approved

his new compensation package, which provided him with an additional in retroactive

compensation for 2014, raised his base salary in subsequent years to

and raised his total compensation to

well over annually. At the same time, Teuber was emphasizing publicly that ANTHC

was underfunded, stating that ANTHC “continue[s] to struggle due to the funding gap left by an

overall [Indian Health Service] budget that is less than half of what is needed to provide basic

health care for our people.”1

To entice the members of the Executive Committee to approve his new

employment agreement, he indicated to the longer-tenured Board members that he would

“study” providing them with retroactive compensation, even though between 1999 and 2011

ANTHC’s Articles of Incorporation provided that board service would be unpaid. Teuber then

instituted a series of mechanisms to ensure that his redirection of federal money from ANMC’s

health services to his own pocket would be hard to discover: renewed enforcement of a “Code of

Conduct” that stated that each Director, despite being designated by a tribal entity that is a

Congressionally-appointed member of the Consortium, owes fiduciary duties only to ANTHC,

and a new “Disclosure Policy” stating that these Congressionally-appointed member tribal

1 Laurel Andrews, “Alaska Native Tribal Health Consortium to receive $153 million in overdue federal payments,” Alaska Dispatch News (June 30, 2014), available at: https://www.adn.com/alaska-news/article/alaska-native-tribal-health-consortium-receive-153-million-overdue-payments/2014/07/01/ (Last visited August 12, 2017).



entities are not entitled to access “confidential” materials presented to the ANTHC Board and

committees in executive session—including Teuber’s compensation information.2

These limitations on information sharing flagrantly violate Section 325. In light

of Section 325’s governance requirements, the tribal entities mandated by Congress to be

represented on the ANTHC Board have a legal right to receive all information provided to

ANTHC Directors, and the individuals designated by the tribal entities to sit on the ANTHC

Board as their representatives are legally obligated to share with their designating tribal entity all

information and documents provided to them in their capacity as ANTHC Directors. The

sharing of ANTHC information is necessary so that the tribal entities can participate in ANTHC

governance and ensure that ANTHC prudently manages limited financial resources, and so that

the financial decisions of ANTHC do not adversely affect ANTHC’s ability to provide health

services at ANMC.

In this litigation SCF seeks a declaration that Congress meant what it said in

Section 325: that ANTHC “shall be governed” by a 15-person Board; that each Board member is

entitled to one vote on all issues that the Board considers; and that decisions should be made by

consensus whenever possible, all of which is antithetical to concentrating power in an Executive

Committee of less than a majority of Board members loyal to Mr. Teuber. SCF also seeks a

declaration that the Disclosure Policy and Code of Conduct cannot prevent designated directors

from carrying out their legal obligations to share “confidential” information with the governing

bodies of their designating tribal entities (subject to reasonable confidentiality restrictions), who

are ANTHC’s true constituents under Section 325. The declaratory relief that SCF seeks is

entirely consistent with the transparency that Congress mandated in Section 325 in order to

prevent the kinds of abuses that have resulted in Teuber’s redirection of federal dollars from

needed health services to his own pocket.

2 ANTHC has continued its pattern of attempting to hide this use of federal funds in this litigation, asserting unsupported privilege and confidentiality claims over certain of the

to avoid disclosing it to SCF and this Court.



II. LEGAL BACKGROUND

A. The Provision of Health Services to Alaska Native Peoples is Founded on Consensus and Transparency

The federal government, through various statutes and treaties, has “charged itself

with moral obligations of the highest responsibility and trust” with respect to Native Americans

and Alaska Native peoples. Seminole Nation v. United States, 316 U.S. 286, 297 (1942). One

obligation, enshrined in a series of statutes passed by Congress and signed by the President,

including the Indian Healthcare Improvement Act of 1976, 25 U.S.C. §§ 1601 et seq., and the

Snyder Act of 1921, 25 U.S.C. § 13, is the provision of health services.3 See 25 U.S.C.

§ 1601(1) (“Federal health services to maintain and improve the health of the Indians are

consonant with and required by the Federal Government’s historical and unique legal

relationship with, and resulting responsibility to, the American Indian people.”).

Plaintiff SCF is a tribal organization under the Indian Self-Determination and

Education Assistance Act (the “ISDEAA”), 25 U.S.C. § 450b(l). The ISDEAA grew out of and

affirms the United States’ trust relationship to Indian tribes. Although the federal government

originally administered programs and provided services directly to Alaska Native and American

Indian people through the Indian Health Service (“IHS”), an agency within the U.S. Department

of Health and Human Services, in the early 1970’s federal policy shifted toward empowering

tribes and tribal organizations to take full responsibility for managing and operating the federal

programs and services that were offered for the benefit of Alaska Native and American Indian

peoples. See 25 U.S.C. § 450(a)(1) (1983).

The ISDEAA provides tribes with the authority, control, discretion, and federal

funding to administer the programs, services, functions, and activities the federal government has

a duty to provide, such as healthcare services. 25 U.S.C. § 450f(a)(1). In order to accomplish the

purposes of the ISDEAA, and in the interest of tribal self-determination and self-governance, the

ISDEAA allows tribes to form a “tribal organization” that is “controlled, sanctioned, or

chartered” by a tribal governing body for the purpose of administering the health services and

programs provided to tribes by the IHS, in a manner that best fits their local regions and

communities. 25 U.S.C. §§ 450b(l) and 450f(a). Indian tribes and tribal organizations may also

form an “inter-tribal consortium,” which is defined in the ISDEAA as “a coalition of two [sic] 3 See https://www.ihs.gov/aboutihs/legislation/ for a list of relevant legislation.



more separate Indian tribes that join together for the purpose of participating in self-governance,

including tribal organizations.” 25 U.S.C. §458aaa(a)(5).

The provision of health services in Alaska by Alaska Native people and for

Alaska Native people has always been a cooperative and transparent endeavor. Declaration of

Katherine Gottlieb (“Gottlieb Decl.”) ¶ 10. These federal resources are scarce and must be

maximized in order to provide the best quality of care. Id. This longstanding tradition of Alaska

tribal entities working together on healthcare facilitated the Alaska Tribal Health Compact

(“ATHC”), a legal agreement between the Department of Health and Human Services and

Alaska tribal entities that is authorized by the ISDEAA. The ATHC sets forth the terms and

conditions of the government-to-government relationship between Alaska Native tribes and/or

tribal organizations and the United States government.4 It is the only multi-party compact of its

kind in the country. It was established on a foundation of a formal consensus process, and the

ability of all Alaska tribal entities to access information and maintain transparency. Id. ¶ 11.

The ATHC was designed to preserve and strengthen the unique Alaska tribal health system and

to avoid competition amongst Alaska tribes and tribal organizations for the scarce federal funds

available to administer tribal health programs and services across the State of Alaska. The

ATHC remains the primary mechanism through which Alaska tribal entities negotiate healthcare

funding with the federal government.

B. Section 325 and the Creation of ANTHC

The IHS began constructing the new ANMC building in Anchorage in the mid-

1990s to serve Alaska Native peoples. Id. ¶ 15. The IHS was planning to transfer management

of ANMC from IHS to Alaska tribal entities. After more than two years of negotiations, more

than 200 separate Alaska tribes and tribal organizations could not reach agreement on a plan for

the structure of the tribal management of the health programs and services of ANMC. Id.

Congress passed Section 325 to solve that problem and to break that stalemate.

Section 325 authorized the creation of ANTHC, a single consortium of tribal

entities, to enter into a Compact and Funding Agreement5 with DHHS to provide certain

4 25 U.S.C. § 450f. 5 In addition to the ATHC, each tribe, tribal organization, or inter-tribal consortium also enters into an individual, legally enforceable Funding Agreement with DHHS, which identifies the programs, services, functions, and activities they will carry out and the Congressionally



statewide health services at ANMC pursuant to the ISDEAA. Section 325(a). Gottlieb Decl.

¶¶ 16-18 & Ex. 1. Congress also made clear that Section 325 was intended to address the

governance of this new consortium of tribal entities, due to their common interest in ensuring

that scarce financial resources are fairly and sufficiently allocated to ANMC services, and that

such ANMC services are equitably delivered statewide. Congress provided that the “Consortium

shall be governed by a 15-member Board of Directors, composed of one representative” of each

of the 13 specified Regional Health Entities that formed ANTHC pursuant to Section 325(a),

including SCF, and two additional representatives of various tribes and tribal organizations that

either operate health programs that are not affiliated with a Regional Health Entity or do not

receive health services from any tribal, regional, or sub-regional health provider (the

“Unaffiliated Tribes”). Section 325(b) (emphasis added). “Each member of the Board of

Directors shall be entitled to cast one vote. Decisions of the Board of Directors shall be made by

consensus whenever possible, and by majority vote in the event that no consensus can be

reached.” Id. (emphasis added). Section 325 goes on to provide that the Board shall set its rules

of procedure, “which shall be published and made available to all members.” Id.

The Committee Report accompanying Section 325, the Report of the Senate

Committee on Appropriations, reinforces the statute’s plain language, explaining that Section

325 “lay[s] out a framework for Alaska Native governance of the [ANMC].” S. Rep. No. 105-

56, July 22, 1997 (“Senate Report”) (emphasis added). Id. ¶ 19 & Ex. 2. The Senate Report

notes again that Congress was “addressing the issue of governance” of ANMC to “ensure

efficient, experienced” management of the new facility by Alaska Native peoples. Id. It

explains that the issue of governance of ANMC is important, so that “the scarce funds available

to meet the health needs of Alaska [will] be professionally and prudently managed to provide

maximum amount of high quality health services to Alaska Natives.” Id. It was critical for

Congress to address the Consortium’s governance structure because, as the Report expressly

acknowledges, “consensus around a particular governing structure” had been “exceptionally

difficult to achieve” given “the existence of over 200 recognized tribes, regional entities, and

various other concerned organizations” that had not been able to agree on a governance structure

“in over 2 years of negotiations.” Id.

approved funds that will be transferred to them in support of such programs, services, functions, and activities.



The Senate Report’s explanation of the purpose of Section 325 is confirmed by a

near-contemporaneous letter that the author of the provision, Alaska Senator Ted Stevens, sent to

Sophia Chase, then-Chairperson of SCF, on September 10, 1997 (“Stevens Letter”). Id. ¶ 20 &

Ex. 3. In the letter, Senator Stevens explains “I developed Section 325 . . . to ensure efficient,

experienced Alaska Native management and control when responsibility for [ANMC’s]

operation is transferred from the [IHS] to Alaska Native management.” Id. (emphasis added).

He confirmed that Section 325 “sets out a framework for ANMC governance which draws on the

expertise of our fine Alaska Native regional health corporations, and at the same time, provides

for representation of all recognized Native entities in Alaska.” (Emphasis added). The goal of

Section 325, as was no secret, was to “ensure that scarce federal funds will be effectively and

efficiently spent on providing high quality health care to Native Alaskans.” Id.

These governance provisions, guaranteeing transparency to ANTHC’s constituent

organizations and equal access to ANTHC decision-making, were critical because Section 325

changed the structure of the tribal health system in Alaska, providing ANTHC with the exclusive

authority to provide certain statewide ANMC health services. See Section 325(c) (certain

“statewide health services” of ANMC shall “only be provided by the Consortium.”) (emphasis

added). Congress intended to encourage the efficient management of ANMC by keeping the

“statewide services of [ANMC] . . . intact in Anchorage,” Senate Report, id. Ex. 2, and limiting

to ANTHC the authority to provide certain ANMC services. At the same time, it recognized the

importance of adequate safeguards to ensure that ANMC would be run professionally,

transparently, and equitably. For this reason, Congress addressed the new consortium’s

governance structure directly: by appointing the entities that would designate board members,

and by ensuring that each entity would have a say in governance of the Consortium.

In sum, due to the fact that Section 325 provides ANTHC with the exclusive

authority to provide certain statewide ANMC health services, Congress also included important

provisions in Section 325 about the governance and structure of the new consortium, in order to

ensure that the Consortium itself would be run according to the principles of transparency,

consensus, and inclusion that had long been a part of the provision of healthcare to Alaska

Natives.



III. FACTUAL BACKGROUND

A. Teuber’s Scheme to Drastically Increase His Compensation

The story of how Teuber used the illegal Executive Committee to enrich himself

at the expense of ANTHC—raising his total compensation from to over

annually in little over a month—highlights the dramatic abuse of power that he was able to

engineer through his manipulation of ANTHC’s corporate governance structure and violation of

the letter and the spirit of Section 325. This kind of abuse is exactly what Section 325 was

designed to prevent. As SCF has learned in discovery, creating the Executive Committee was

only the last step in his carefully orchestrated plan. The first steps began many months earlier.

1. The Chairman/President Position Was Intended to Be a

Teuber’s original employment agreement for his service as both President and

Chair of ANTHC, provided that he would be paid an annual salary of


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2. ANTHC Raising Teuber’s Salary

In mid-2014,


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To date, ANTHC has refused to produce

This

assertion is legally untenable and will be the subject of a forthcoming motion to compel should

ANTHC not produce these documents voluntarily.


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Teuber’s

income as President and CEO of KANA, his true full-time job, was between “$500,000 -

$1,000,000.”9

9 Teuber has never disclosed that fact to SCF, even in this litigation. However, as a member of the University of Alaska Board of Regents, Teuber is required to file a Public Official Financial Disclosure (POFD) form by the Alaska Public Offices Commission (APOC). Teuber’s POFD form for calendar year 2014 states that his income from KANA for 2014 was between “$500,000 - $1,000,000.” Temko Decl. ¶ 17 & Ex. 16.


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also providing Teuber with a bountiful compensation package that would make him the envy of

any Alaskan executive, much less one at a non-profit spending federal dollars:

separated the roles of President and Chair, and provided that

the Chair was eligible for additional


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B. The Creation of the Illegal Executive Committee to Ratify Teuber’s Outrageous Compensation Package

The that Teuber had been

carefully orchestrating for months needed Board approval. But Teuber wanted to limit

disclosure (and discussion) of those issues, so he decided to side-step the Board by creating a

loyal Executive Committee that could meet without notice and could act with the full power of

the Board. He then, almost immediately, had the Executive Committee meet and approve his

compensation package, even though the full Board had just met and easily could have considered

it.

1. The Creation of the Executive Committee at the December 2014 Meeting

ANTHC’s governance structure worked as Congress had designed it for more

than fifteen years. Gottlieb Decl. ¶ 23. All major issues affecting the organization were

presented to and decided by the full Board, including executive compensation. Id.

On November 2014, Teuber sent an email notice to the Board of Directors that

the Board would consider amendments to the ANTHC Bylaws at the Board’s next meeting,

which was scheduled for December 2-3, 2014 (the “December 2014 meeting”). Declaration of

Ileen Sylvester (“Sylvester Decl.”) ¶ 4 & Ex. 1. The email notice did not attach or provide the

text of the proposed amendments, nor did Teuber or anybody at ANTHC provide the

amendments to members of the Board prior to the December 2014 meeting. Id. The notice was

intentionally cryptic,

Teuber’s email notice of the proposed Bylaw changes did not mention changes to his job

description or executive compensation. Id. ¶ 4.

SCF’s designated Alternate Director, Ileen Sylvester, emailed Teuber that same

day requesting



The proposed amendments to the Bylaws sought to accomplish two main goals.

First, they proposed forming a five-member Executive Committee that could exercise virtually

the full power of the Board. Sylvester Decl. ¶ 9 & Ex. 3.

Under the proposed

amendments, the Executive Committee could take almost any action that the Board could take

without the approval of or even notice to the full Board, including setting executive

compensation. The Executive Committee Charter provided that notice of Committee meetings

had to be provided only not all members of the Board. Id. Ex. 3,

Committee Charter ¶ 4.1.

There was no apparent operational need to create an Executive Committee.

ANTHC had functioned without one for 15 years without issue. Gottlieb Decl. ¶ 23.

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Second, the proposed Bylaw amendments also provided for splitting the roles of

President and Chair of the Board into two different, separately compensated positions, but

permitting the same person to fill both roles. Sylvester Decl. ¶ 10. Teuber, of course, had filled

both roles since 2008, and his predecessor had done the same. Teuber did not explain why this

change was needed, but the motivation was obvious: to surreptitiously raise his compensation.

One highly paid position was not enough for him—he wanted two. The Board also adopted a

revised

Sylvester Decl. Ex. 3.

Teuber must have realized that it would facilitate his strategy to have his loyal

Executive Committee give him a new, lucrative employment agreement in secret if he gave the

Executive Committee members something in return.

Teuber’s plan was a thinly disguised strategy to get substantial retroactive

cash payments to the Executive Committee members who were going to vote on his

compensation, by providing retroactive compensation to all directors. The plan was also an ultra

vires one, given that the ANTHC Articles of Incorporation prohibited ANTHC directors from

receiving compensation for their Board service from ANTHC’s inception through November

2011. Sylvester Decl. ¶ 14 & Ex. 7.

Although consideration of the amendments that Teuber wanted the Board to

approve at the December 2014 meeting violated the Bylaws, Teuber brought them to a vote.



2. The Executive Committee Increases Teuber’s Salary

The Executive Committee wasted little time in taking money from ANMC

programs to increase Teuber’s compensation. The Committee did not have its initial meeting

until December 15, 2014. Then, the following day—less than two weeks after the Executive

Committee had been formed—the Executive Committee met on December 16, 2014, without any

notice to other Board members. Temko Decl. ¶ 19 & Ex. 18. Nothing urgent—nothing that

could not wait until the next full Board meeting, or that could not have been discussed at the full

Board meeting that happened two weeks before—was discussed at this meeting. Instead, it

passed a motion to authorize the Vice Chair of the Board to sign Teuber’s new employment

agreement as President—the agreement that Teuber and Heslep had drafted that

and increased his base salary from to . The

Executive Committee also

While SCF’s designated director was not informed of this

meeting and not permitted to attend,

.11

Approving executive compensation in the Executive Committee was a marked

break from past practice. Gottlieb Decl. ¶ 23. Given that ANTHC is primarily funded with

federal money and that Section 325 requires that ANTHC “shall be” governed by the full Board,

which “shall” make decisions by consensus when possible, past executive compensation

decisions for ANTHC’s senior management had been made by the full Board. Id.

SCF’s designated director was not informed that the Executive Committee had

even met until Teuber summarized the results of the meeting in an email dated

—two months later. Sylvester Decl. ¶ 16 & Ex. 8.

Further, because the then-existing

version of the Bylaws that Teuber had pushed through at the December 2014 meeting did not

require the full Board to ratify Executive Committee action before it became effective, Teuber’s

new contract was a done deal: the Executive Committee had bound ANTHC to the agreement

11



without input from the Board, and there was nothing the Board could do about it.

C. SCF Protests the Violations of Section 325

1. SCF Expresses Concern that the Executive Committee Is Illegal

Teuber’s apparently premeditated creation of the Executive Committee in order to

raise his own salary caused great concern with SCF’s designated primary and alternate directors.

ANTHC’s response was not remotely satisfactory

Over the ensuing months, SCF continued to protest the Bylaw changes that

created the Executive Committee.



The Board had little choice in ratifying the employment

contracts with Teuber and Helgesen, as the employment contracts had already been signed.



2. Teuber Stifles SCF’s Proposed Bylaw Amendments

SCF’s opposition to the illegal Executive Committee also involved repeated

attempts to amend the ANTHC Bylaws.

Heslep informed Sylvester that Sylvester had some sort of “conflict of interest”

unrelated to the Bylaws. The Bylaws and Policy Committee, with no representative from SCF

present to explain them, ultimately declined to recommend SCF’s proposed amendments. Id.

3. Executive Compensation Continues to Be Decided by the Illegal Executive Committee

The full ANTHC Board was scheduled to meet on December 2-3, 2015. This

end-of-year meeting was the one at which, historically, the Board had considered compensation

for ANTHC executives. Sylvester Decl. ¶ 26.

When SCF’s designated alternate director Sylvester attempted to attend the

meeting, she was excluded, because no Alternate Directors were permitted at the meeting—a

blatantly invented excuse. Id. ¶ 27.

12 The per year payment would be paid even for those years where the primary director had already been paid. The resolution further provided that ANTHC could make a lump sum payment to each alternate director equal to per year for each year the individual attended at least one Board meeting. Id.


FRAMND

Rectangle


The regularly scheduled full Board meeting occurred as scheduled the next two

days.

D. ANTHC Responds by Limiting the Information that Designated Directors Can Share with their Congressionally Appointed Designating Entities

In sum, since its creation in December 2014 and through much of 2016, the

Executive Committee was still able to meet without notice to the other Board members and was

still able to wield the powers of the full Board without any ratification requirement. But there

was another problem, one that made it difficult for ANTHC’s constituent organizations to

monitor ANTHC’s corporate governance issues and prevented them from exercising informed

control over ANTHC: the strict limits that ANTHC imposed on sharing information with the

Congressionally-appointed designating organizations. These restrictions fail to recognize that

designated directors might owe fiduciary duties to both ANTHC and their designating

organization, and pit ANTHC against the Congressionally-appointed designating organizations,

viewing them as competitors, rather than as collaborators in the consortium as envisioned by

Section 325.

1. The January 2016

In early January 2016, Sylvester learned accidentally about a meeting of the

Executive Committee—no notice had been provided, rather Sylvester learned because she

happened to be at another ANTHC committee meeting and heard others discussing the upcoming

meeting. Sylvester Decl. ¶ 29. Sylvester, concerned about this secret Executive Committee

meeting, decided to attend.

. Although

Sylvester was permitted to attend, Heslep informed her that she would have to sign an onerous

confidentiality agreement before she would even be permitted to see . Id. In other

words, ANTHC denied directors access to information that they had an absolute right to see and

information that was critical to running the organization.



Sylvester (and Gottlieb) refused to sign the onerous

2. The ANTHC Code of Conduct

The proposed highlighted a second information-related

issue that had been simmering for some time: the degree to which designated directors could

share information with their Congressionally-appointed designating entities. Sylvester Decl.

¶ 30. SCF had long taken the position that the Congressionally-appointed entities that constitute

the ANTHC Board must have information about ANTHC in order to have an effective voice in

ANTHC’s governance. Id. This is consistent with Section 325 and its legislative history, which

highlights Congress’ desire that ANTHC be run collaboratively and in a way that incorporates

guidance and expertise from its constituent members. But it was arguably inconsistent with

ANTHC’s Code of Conduct, which provided that ANTHC Directors had “a duty of undivided

loyalty” to ANTHC without regard to the interests of their designating organization. Id. ¶ 31 &

Ex. 21.

To that end, in March 2016 SCF proposed amending ANTHC’s Code of Conduct

to clarify that designated directors have the right and obligation to share confidential information



and documents and confer with the boards of their appointing entities in order to obtain direction

and input from those entities—as envisioned by Congress—without fear that ANTHC would see

such sharing as a breach of duty to ANTHC. Sylvester Decl. ¶ 32 & Ex. 22. SCF’s changes

sought to acknowledge that the Congressionally-appointed regional health organizations are

supposed to play a critical role in the management of the Consortium pursuant to Section 325,

and that they cannot play that role without access to information. Id. Information sharing would

be subject to the board of the designating entity keeping the information confidential, and carried

other commonsense restrictions to ensure that disclosure did not harm ANTHC and that

designating entities could not use information for their own benefit at the expense of ANTHC.13

Id. SCF explained to ANTHC that this was the best way to ensure that designated directors meet

their obligations under Section 325. Id.

ANTHC’s leadership disagreed, and continues to disagree. In Teuber’s view,

ANTHC’s Board is composed of fifteen designated individuals, not Congressionally-appointed

representatives of the thirteen Regional Health Entities and Unaffiliated Tribes that are members

of the Consortium. SCF and ANTHC’s leadership attempted to negotiate changes to the Code of

Conduct extensively in early-mid 2016. Sylvester Decl. ¶ 33. SCF pushed for changes that

would make its position clear and bring the Code of Conduct into harmony with Section 325. Id.

ANTHC refused to entertain SCF’s proposed revisions to the Code of Conduct,

and actually proposed its own that the Board adopted at the June 2016 meeting. Id. While these

changes clarified that Directors could share Board resolutions, final meeting minutes, and Board

packet materials with their designating entities, they stopped far short of permitting full

disclosure of Board material. Id. ¶ 33 & Ex. 23.

. And the

amendments made no progress toward recognizing that the Congressionally-designated tribal

entities were supposed to have a major role in governing the Consortium under Section 325. Id.

¶ 34.

, maintaining that SCF’s Board had an absolute legal right to all ANTHC Board

information as a Congressionally-appointed member of the Consortium under Section 325. Id.

13 SCF also did not propose materially changing or eliminating the section of the Code of Conduct dealing with actual conflicts of interest that would require recusal. Id.



The SCF Board and its Designated Directors on the ANTHC Board continued to

push Teuber for SCF’s proposed changes to the Bylaws and Code of Conduct during the summer

of 2016, and ultimately demanded that ANTHC bring them to a vote at its September 28-29,

2016 Board meeting. Id. ¶ 35. In early August,

3. The Disclosure Policy

Teuber also introduced a new “Disclosure of Records and Information Policy”

that he had the Board vote on and approve at the September 28, 2016 ANTHC Board meeting.

Id. ¶ 37 & Ex. 25.

The policy further restricted the information that ANTHC could share not only with the

Congressionally-appointed designating entities, but with its own Directors. Id. Indeed, the



policy drastically limited Directors’ access to what ANTHC considered to be “[c]onfidential,

proprietary, and other sensitive information,” in violation of the Directors’ rights under Alaska

law. The policy stated

The policy stated

The policy further provided

In short, the policy gave unnamed persons at ANTHC absolute discretion to determine what

information would be shared and with whom, including Directors, with a rebuttable presumption

against disclosure. Id. This policy constituted a major breach of trust between SCF and

ANTHC, as ANTHC had proposed it and pushed it through the Board without so much as

mentioning it to SCF, with which it had been engaged in negotiations regarding information

sharing for almost two years. Id.

E. The Current State of Affairs

1. SCF Makes Incremental Progress on Executive Committee Issues

At the same time that SCF was negotiating changes to the Code of Conduct and

Disclosure Policy, it continued to seek changes to the Bylaws related to the Executive

Committee. At the September 2016 ANTHC Board meeting, Teuber agreed to allow the Board

to vote on Bylaw changes that would require advanced notice of Executive Committee meetings,

would limit Executive Committee authority to urgent matters that arose between meetings, and

would make Executive Committee actions

(but would not require Board ratification). Sylvester Decl. ¶ 38 & Ex. 26. The Board

adopted these Bylaw changes.

While these changes were encouraging, they were not enough, as they still

permitted the Executive Committee to exercise the power of the full Board without requiring

Board ratification, in violation of Section 325. In other words,

, nothing would prevent the Executive Committee from signing a contract with a third

party (or one of ANTHC’s employees) that is immediately effective. While the Board could



later rescind the contract, that would potentially subject ANTHC to an action for breach of

contract. If SCF’s proposed language had been included, then the Executive Committee would

not have had the power to execute such a contract.

Teuber met with the SCF Board on November 2, 2016. Id. ¶ 39. The SCF Board

gave Teuber one more chance to propose and have the Board pass at the upcoming November

28-29, 2016 ANTHC Board meeting the changes to the Code of Conduct and Bylaws that SCF

had been proposing for almost two years. Id.

2. SCF and ANTHC Begin Negotiating Confidentiality Agreement

Throughout this process, SCF recognized that there need to be reasonable

restrictions on the sharing of confidential information between ANTHC and SCF, and to that end

began negotiating a confidentiality policy with ANTHC in December 2016. Id. ¶ 40. On

January 1, 2017, SCF’s General Counsel, Lisa Mock, sent Heslep a draft confidentiality

agreement. Id. The agreement provided that SCF, through its Designated Directors, had an

absolute legal right to all documents regarding ANTHC’s business and operations in order to

participate effectively in ANTHC’s governance. Id. It also clarified that SCF’s Designated

Directors may have fiduciary duties to both ANTHC and SCF and would have required ANTHC

to recognize as much. Id. SCF promised to maintain the confidentiality of any information

shared with it, consistent with ANTHC’s stated concerns about sensitive information. Id.

3. SCF Brings Suit to Declare Teuber’s Power Grab Illegal

For two years, SCF sought changes to the Bylaws that would make them legal

under Section 325. As initially drafted, the Bylaws, Code of Conduct, and Disclosure Policy

violated Section 325 in the following ways:

• The Executive Committee could wield virtually the full power of the Board,

and its actions were not required to be ratified by the Board;

• The Executive Committee could meet without notice to the other members of

the Board;

• The Code of Conduct and Disclosure Policy prohibited SCF’s designated

directors from sharing information with their Congressionally-appointed

designating entity, SCF, effectively shutting SCF out of critical decisions and

preventing it from sharing its expertise with ANTHC.



Teuber’s manipulation of ANTHC’s corporate governance structure violates

Section 325. While ANTHC has now subjected Executive Committee actions to ratification, and

now requires notice of Executive Committee meetings, ANTHC did so only after SCF filed this

lawsuit. Sylvester Dec. ¶ 41. SCF seeks a declaration that the Executive Committee provisions,

as initially drafted, violated Section 325 so as to prevent ANTHC from imposing them ever

again. Meanwhile, ANTHC has continued to refuse to amend its Code of Conduct and

Disclosure Policy.

After SCF brought this suit, ANTHC responded with several false public

statements about the nature of the Executive Committee. Sylvester Decl. ¶ 42 & Ex. 27. In a

statement posted to its website on January 25, 2017, ANTHC made the following claims which

were demonstrably false:

• That “All Executive Committee decisions must be ratified by the full Board of

Directors before they are enacted.” This was flatly contradicted by the

Bylaws in effect at the time, which made Executive Committee decisions

“subject to ratification or rescission,” meaning that the Board was not required

to ratify an action before it went into effect.

• That ANTHC board members were underpaid for fifteen years because IHS

failed to honor its funding obligations. While IHS did fail to pay all the funds

to which ANTHC was entitled, ANTHC board members were not paid for

fifteen years because ANTHC’s Articles of Incorporation required them to be

unpaid.

IV. STANDARD OF REVIEW

Summary judgment is proper when a “movant shows that there is no genuine

dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.

R. Civ. P. 56(a). “A party asserting that a fact cannot be or is genuinely disputed must support

the assertion by” citing to depositions, documents, affidavits, or other materials. Fed. R. Civ. P.

56(c)(1)(a). A party also may show that such materials “do not establish the absence or presence

of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the

fact.” Fed. R. Civ. P. 56(c)(1)(B). An issue is “genuine” only if there is sufficient evidence for a

reasonable fact-finder to find for the non-moving party. Anderson v. Liberty Lobby, Inc., 477

U.S. 242, 248-49 (1986). A fact is “material” if the fact may affect the outcome of the case. Id.



at 248. “In considering a motion for summary judgment, the court may not weigh the evidence

or make credibility determinations, and is required to draw all inferences in a light most

favorable to the non-moving party.” Freeman v. Arpaio, 125 F.3d 732, 735 (9th Cir. 1997).

Where the party moving for summary judgment would bear the burden of proof at

trial, that party bears the initial burden of producing evidence that would entitle it to a directed

verdict if uncontroverted. See C.A.R. Transp. Brokerage Co. v. Darden Rests, Inc., 213 F.3d

474, 480 (9th Cir. 2000). If the moving party satisfies its initial burden of production, then the

non-moving party must produce admissible evidence to show that a genuine issue of material

fact exists. See Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102-03 (9th Cir.

2000). The non-moving party must “identify with reasonable particularity the evidence that

precludes summary judgment.” Keenan v. Allan, 91 F.3d 1275, 1279 (9th Cir. 1996) (quotation

marks omitted). It is not the duty of the district court “to scour the record in search of a genuine

issue of triable fact.” Id. (quotation marks omitted). “A mere ‘scintilla’ of evidence will not be

sufficient to defeat a properly supported motion for summary judgment; rather, the non-moving

party must introduce some ‘significant probative evidence tending to support the complaint.’”

Summers v. Teichert & Son, Inc., 127 F.3d 1150, 1152 (9th Cir. 1997). If the non-moving party

fails to make this showing, the moving party is entitled to summary judgment. Celotex Corp. v.

Catrett, 477 U.S. 317, 323 (1986).

V. ARGUMENT

The plain language of Section 325 makes clear that Congress did not intend to

permit ANTHC to delegate virtually the full power of the Board to an executive committee, or

prohibit sharing critical information with the Congressionally-appointed designating entities.

This language is confirmed by the statute’s legislative history. Nothing in Alaska corporate law

contravenes Section 325’s design, and to the extent it does, it is preempted by Section 325.

A. The Plain Language of Section 325 Mandates that All Decisions Be Made by the Full Board of Directors and Prohibits Information Sharing Restrictions

1. Section 325 Prohibits Delegating the Power of the Board to the Executive Committee

This Court can resolve this case without looking beyond the four corners of

Section 325, which clearly prohibits ANTHC from stripping the Board of its Congressionally-

granted authority. “The starting point for [an] interpretation of a statute is always its language.”



United States v. Gallegos, 613 F.3d 1211, 1214 (9th Cir. 2010) (quotation marks omitted).

When “the plain language of a statute renders its meaning reasonably clear, [courts] will not

investigate further unless its application leads to unreasonable or impracticable results.” United

States v. Fei Ye, 436 F.3d 1117, 1120 (9th Cir. 2006) (quotation marks omitted). “If from the

plain meaning of the statute congressional intent is clear, that is the end of the matter.” Royal

Foods Co. v. RJR Holdings, Inc., 252 F.3d 1102, 1106 (9th Cir. 2001).

Section 325 is crystal clear. Congress authorized the creation of ANTHC and

mandated that it “shall be governed by a 15-member Board of Directors.” Section 325 requires

that this Board “shall be composed of one representative” from each of the thirteen Regional

Health Entities, as well as two representatives of the Unaffiliated Tribes. It reinforced the

cooperative nature of ANTHC’s governance by explicitly stating that “[e]ach member of the

Board of Directors shall be entitled to cast one vote,” and that “decisions of the Board of

Directors shall be made by consensus whenever possible.” Congress used the compulsory term

“shall” six times alone in Section 325(b), and, as is well established, “the word ‘shall’ is a

mandatory term.” N. California Dist. Council of Laborers v. Pittsburg-Des Moines Steel Co., 69

F.3d 1034, 1036 (9th Cir. 1995) (quotation marks omitted).

Granting the full powers of the Board to the Executive Committee, which

Teuber’s December 2014 resolution did, violated the plain language of Section 325. It abridged

the power that Congress has given to the designating tribal organizations under Section 325 to be

informed about and direct ANTHC by requiring that ANTHC be governed by a 15-person

Board, with each member of the Board having one vote. Congress was clear: ANTHC, an inter-

tribal consortium created to cooperatively administer the healthcare services provided at ANMC,

was to be governed by the members of the Consortium, and was to be governed by the consensus

of its members whenever possible. Creating the Executive Committee with the full power of the

Board flouted this crystal clear Congressional mandate: ANTHC was no longer governed by 15

Directors, but only 5, and it is not possible to get consensus (or even an eight-person majority)

from 15 people when only 5 people are making decisions.

While creation of an Executive Committee is not necessarily illegal in the

abstract, delegating the Board’s full power to it undoubtedly was. The broad delegation of

power was unusual in that the Executive Committee’s decisions did not need to be approved by

the full board before they went into effect, and it was not limited to acting between Board



meetings or in emergency situations. Indeed, until recently, there was no requirement that

Executive Committee actions even needed to be ratified by the full Board. Thus, although the

Board ultimately ratified the actions, the Executive Committee’s decisions to enter into new

employment agreements with Teuber and Helgesen in December 2014 were immediately

effective – just as Teuber envisioned.

That the Executive Committee could meet without notice to the full Board was

also unusual. To that point, ANTHC’s Bylaws provided that all Directors be provided with

notice of all Board and committee meetings. The December 2014 amendments purported to do

away with this requirement solely for meetings of the Executive Committee: the Executive

Committee could now meet in secret, make virtually any decision that the Board could make,

and not inform Board members and their designating organizations until long after the decision

was final, as happened when the Executive Committee dramatically increased Teuber’s salary.

2. ANTHC’s Restrictions on Information Sharing also Violate Section 325

The information restrictions in the Code of Conduct and Disclosure Policy violate

Section 325 as well. The clear import of appointing thirteen specific Regional Health Entities to

form a consortium and expecting that decisions for the Consortium be made “by consensus

whenever possible” was to draw on collective expertise to run the Consortium. The Consortium

is the exclusive provider of certain statewide ANMC health services. To ensure that ANTHC is

professionally run and provides services equitably, the Consortium’s members must be able to

access critical information—including information about how ANTHC spends its money.

Making the dissemination of information subject to the onerous restrictions in the Code of

Conduct and Disclosure Policy is fundamentally inconsistent with Section 325’s commands.

ANTHC must share information critical to running the organization not only with

each designated director, but also with each of the Congressionally-appointed designating

entities. The members of ANTHC’s Board are merely “representative[s]” of each of the thirteen

Regional Health Entities, as well as the Unaffiliated Tribes, referenced in Section 325. The tribal

entities may replace their own designated directors, and their designated directors have the duty

to look out for the interests not only of ANTHC, but, at times, their designating organizations. It

is impossible for each designating entity, which is “entitled to cast one vote,” to make informed

decisions about how to vote without access to ANTHC information. Congress surely did not

mean to set up ANTHC as a member-governed consortium with the expectation that the



members would govern it blindly—after all, there are “scarce funds available . . . to provide [the]

maximum amount of high quality health services to Alaska Natives.” Senate Report.

B. Legislative History of Section 325 Confirms Its Plain Language

The plain language of Section 325 is fully supported by its legislative history,

which is sparse, but confirms that the intent of Congress was that Section 325 would provide a

framework for governance of the new consortium. When the plain meaning of a statute is clear,

courts “look to legislative history only to determine whether it is clear that ‘Congress meant

something other than what it said.’” Johnson v. Consumerinfo.com, Inc., 745 F.3d 1019, 1022

(9th Cir. 2014). Here, neither of the two relevant pieces of legislative history contradicts the

statute’s plain language. In fact, they confirm it.

1. The Senate Report Confirms Section 325’s Plain Language

The first piece of relevant legislative history is the Senate Report. The Senate

Report14 accompanying Section 325 explains that it “lay[s] out a framework for Alaska Native

governance of the [ANMC].” It notes that Congress was “addressing the issue of governance” of

ANMC to “ensure efficient, experienced” management of the new center by Alaska Natives. Id.

The issue of governance of ANMC was important, given that it would have “an annual operating

budget approaching $100,000,000.” Id.

The Senate Report explains that Section 325 was enacted in response to the

inability of more than 200 separate Alaska tribes and tribal organizations to reach “consensus

around a particular governing structure” for the tribal management of the health programs and

services of ANMC. The Senate Report confirms that a critical component of Section 325 was to

set the governance structure for the Consortium. And that makes sense: Section 325 provides

ANTHC with the exclusive authority to provide certain statewide ANMC health services and so

Congress wanted to ensure that it established a system that would guarantee representation, and

permit all involved to bring their expertise to bear in running the health programs and services of

ANMC. To that end, as set out in the plain text of Section 325, Congress set up a system that

guaranteed each “representative” of the thirteen Regional Health Entities, as well as the

14 Courts routinely look to these reports as relevant legislative history. See, e.g. Fernandez-Ruiz v. Gonzales, 466 F.3d 1121, 1142 (9th Cir. 2006) (looking to a Senate report to confirm legislative intent for 18 U.S.C. § 16(a)).



Unaffiliated Tribes, one vote. The Senate Report confirms that vesting the power of the full

Board in the Executive Committee violated Congress’ clear mandate.

The Senate Report also confirms that ANTHC’s restrictions on sharing

information are fundamentally inconsistent with Congressional design. It explained that the goal

of Section 325 is to “ensure efficient, experienced Alaska Native management and control” of

ANMC. (Emphasis added). In order for ANMC to be “professionally and prudently managed,”

Congress created a system that would “draw on the existing expertise of the Alaska Native

regional health entities.” (Emphasis added). These statements could not be more clear:

Congress envisioned that the regional health entities—entities that had been providing “extensive

regional health networks in Alaska” for decades—would provide the expertise to run ANMC

through ANTHC. In order for the regional health entities to run ANMC, they must have access

to the information that is critical to its operation. This is simply not possible if the regional

health entities are prohibited from obtaining such information. Congress could not have

envisioned that ANMC would be run by individual Directors, completely isolated from the

regional health entities that appointed them.

2. The Stevens Letter Fully Supports the Senate Report and Section 325’s Plain Language

The second relevant piece of legislative history is the Stevens Letter. While

“ordinarily even the contemporaneous remarks of a single legislator who sponsors a bill are not

controlling in analyzing legislative history,” this kind of legislative history can be “considered in

light of other legislative history” and the statute’s plain language. Yang v. California Dep't of

Soc. Servs., 183 F.3d 953, 960 (9th Cir. 1999) (quotation marks omitted); accord Chrysler Corp.

v. Brown, 441 U.S. 281, 311 (1979) (instructing courts to consider comments by one legislator

within the context of the remaining legislative history, but not disregarding it outright). When

remarks by individual legislators “do not conflict with the plain meaning . . . but rather support

it, they [can] add to the certainty” of this Court’s interpretation. Yang, 183 F.3d at 960.

The Stevens Letter is fully consistent with the plain language of Section 325 and

the Senate Report. It emphasizes that the purpose of Section 325 was to “ensure efficient,

experienced Alaska Native management and control” of ANMC and to “draw[] on the expertise

of our fine Alaska Native regional health corporations, and at the same time, provide[] for

representation of all recognized Native entities in Alaska.” (Emphasis added). It thus fully

confirms the core aims of Section 325’s plain language: to permit regional health entities,



representing their constituent members, to control ANMC, and to lend their expertise and

experience in doing so. As is clear by now, it is impossible for the regional health entities to

“control” ANMC if they are excluded from critical decision-making by ANTHC. It is similarly

impossible for ANTHC to “draw[] on the expertise” of the thirteen Congressionally-appointed

regional health entities if they are excluded from Board decisions and deprived of relevant

information. And even when the Board members themselves are consulted on particular

decisions, if they are not permitted to consult their Congressionally-appointed designating

entities, then it is difficult for the “experience” of the “regional health corporation[]” to help

inform the ANTHC Board’s decision-making on the critical issues it considers.

C. Alaska Nonprofit Corporation Law Is Not to the Contrary

ANTHC may argue that creating an Executive Committee is permissible under

Alaska’s Nonprofit Corporations Act (“NCA”), and that it should be afforded broad deference in

the Bylaws and rules that it is permitted to adopt. It is not SCF’s position that there is anything

inherently wrong with the creation of an Executive Committee. But, by virtue of the Supremacy

Clause to the U.S. Constitution, Section 325 prevents ANTHC from vesting the Executive

Committee with the power of the full Board. Further, given that the mission of ANTHC is to

provide healthcare to Alaska Natives in a cooperative way, any parallel to the for-profit context

that ANTHC might make is inapposite.

1. Section 325 Preempts Alaska Nonprofit Law

It is well established that “Congress has the constitutional power to preempt state

law,” and “may do so either expressly . . . or implicitly.” Whistler Investments, Inc. v.

Depository Trust & Clearing Corp., 539 F.3d 1159, 1164 (9th Cir. 2008). Pursuant to the

Supremacy Clause, “state laws that conflict with federal law are without effect.” Altria Grp.,

Inc. v. Good, 555 U.S. 70, 76 (2008) (quotation omitted). “Conflict preemption arises when [1]

compliance with both federal and state regulations is a physical impossibility, . . . or [2] when

state law stands as an obstacle to the accomplishment and execution of the full purposes and

objectives of Congress.” McClellan v. I-Flow Corp., 776 F.3d 1035, 1039 (9th Cir. 2015)

(quotation marks omitted; alterations in original). “Congress may indicate pre-emptive intent

through a statute’s express language or through its structure and purpose.” Altria, 555 U.S. at

76.



Given the historic trust relationship between the federal government and

American Indians/Alaska Natives, courts routinely find that Congressional legislation

specifically directed at Native American issues preempts state law, including in the context of

Alaska corporate law. For example, Broad v. Sealaska Corp., 85 F.3d 422 (9th Cir. 1996)

concerned the intersection of the Alaska Native Claims Settlement Act (“ANCSA”) and Alaska

corporate law. Sealaska, a corporation organized under ANCSA, established a settlement trust,

as authorized by ANCSA, to make payments to Sealaska shareholders over the age of sixty-five.

Sealaska shareholders under the age of sixty-five brought suit, arguing that under Alaska

corporate law, it was illegal to discriminate among shareholders of the same class (see Alaska

Stat. § 10.06.305(b)). The court held that ANCSA preempted Alaska corporate law because

ANCSA “anticipate[d] that trusts may discriminate in favor of a particular class of shareholders,”

thus creating a conflict. Id. at 426. “In such cases, the federal law prevails.” Id. at 427.15 See

also Tohono O’odham Nation v. City of Glendale, 804 F.3d 1292, 1300 (9th Cir. 2015)

(provision of Arizona law was a “clear and manifest obstacle to the purpose” of the federal

legislation concerning Native Americans).

Section 325 preempts any provision of the NCA that impedes Congress’

objectives. As explained above, Congress’ goal in Section 325 was to set up a consortium that

would provide a governance system for ANMC. The building blocks of the consortium were

existing regional health entities, who could offer their expertise and ensure that the consortium

distributed health services equitably. In order to ensure that ANMC’s services were provided in

a fair manner, each regional health entity was granted a seat on the Board. And in order for the

regional health entity to be able to make informed decisions about management of ANTHC, it

must have access to critical information about the Consortium. Any law that seeks to limit the

transparency and inclusivity that Congress clearly intended ANTHC to have is preempted.

Such conflict preemption prevents ANTHC from concentrating the full power of

the Board in the Executive Committee. The NCA does provide that a board of directors may

15 To be sure, certain provisions of Alaska corporate law expressly acknowledge that corporations organized under ANCSA are subject to certain different rules. See, e.g. Alaska Stat. § 10.06.960 (providing certain exemptions to Alaska corporate law for ANCSA corporations). But the Ninth Circuit did not premise its preemption determination on these provisions of Alaska law. Rather, its holding addressed a situation where a provision of otherwise generally applicable Alaska corporate law conflicted with the federal statute.



create an executive committee that “may exercise the authority of the board of directors in the

management of the corporation.” Alaska Stat. § 10.20.111. But this directly conflicts with the

federal scheme, which provides that the Board of ANTHC “shall” be composed of fifteen

members, and each member “shall” have one vote.

This preemption also prevents ANTHC from adopting bylaws that severely limit

the kinds of information that can be shared with Congressionally-appointed designating entities.

This is a provision that is not expressly covered by the NCA. Cf. Alaska Stat. § 10.20.191

(providing that “members” may inspect books and records, but ANTHC, as currently constituted,

does not have “members”).

2. Delaware Corporate Law Fails to Take the Special Considerations of Section 325 into Account

The issue of dual fiduciary duties arises periodically in the commercial context,

where a major investor in a company may place a person on the company’s board who also owes

fiduciary duties to the investor. Delaware courts are clear that where a director holds “dual or

multiple fiduciary obligations,” there is “no dilution of the duty of loyalty” to either entity. In re

Trados Inc. S'holder Litig., 73 A.3d 17, 46 (Del. Ch. 2013) (quotation marks omitted); see also

Weinberger v. UOP, Inc., 457 A.2d 701, 710 (Del. 1983) (“individuals who act in a dual capacity

as directors of two corporations . . . owe the same duty of good management to both

corporations”).16

While helpful in illustrating that ANTHC directors who also might owe fiduciary

duties to their Congressionally-appointed designating entities continue to owe duties to both

entities, the commercial context is an inapposite comparison to the instant situation for several

reasons. First, as described further below, the primary nature of the relationship between

ANTHC and SCF is not, and should not be, as competitors. Gottlieb Decl. ¶¶ 24-25. They

jointly run ANMC, and, by statute SCF provides primary care, an arena in which ANTHC does

not compete. Id. This differs greatly from the scenario of most commercial cases involving dual

fiduciary duties, when a director appointed by an investor appropriates non-public information of

the company in order to enrich the outside investor at the expense of the company’s

shareholders. Courts rightly hold that such misappropriation of information violates the duty of 16 Alaska courts sometimes look to interpretations of Delaware corporate law. The Alaska Supreme Court has described the Delaware Supreme Court as “the mother court of corporate law.” Jerue v. Millett, 66 P.3d 736, 745 (Alaska 2003).



loyalty to the company. See, e.g., McMullin v. Beran, 765 A.2d 910, 923 (Del. 2000) (holding

that the designated directors owed an uncompromising duty of loyalty when evaluating a

potential third party transaction).

The second key difference is to whom a director owes duties: in the commercial

context, directors of a company owe fiduciary duties to shareholders of that company, a concept

that has no bearing here. Courts are clear that the reason that directors owe undivided duties of

loyalty in the commercial context is because failure to do so may harm shareholders of the

company, whom the board must put first. See, e.g., In re Trados Inc. S’holder Litig., No. CIV.

A. 1512-CC, 2009 WL 2225958, at *7 (Del. Ch. July 24, 2009). Conversely, here, ANTHC has

no shareholders (or members) unmoored from its Board members—it is composed of its

Congressionally-designated constituent organizations, including SCF. While the interests of

SCF could diverge from the interests of another Congressionally-designated constituent, all of

these entities would be on a level playing field. Each would have the same information, and

each would bring its expertise and opinions to bear.

Finally, SCF is not asserting that the right of designated directors to share

information with designating entities is unqualified. Should SCF have a bona fide conflict of

interest in a matter under consideration (such as a proposed transaction between ANTHC and

SCF), SCF’s designated director would have to recuse himself or herself from considering the

matter as an ANTHC director. However, ANTHC refuses to allow SCF’s designated directors to

share information with SCF even where there is no bona fide conflict.

3. ANTHC Misapprehends SCF’s Theory of Fiduciary Duties

In its Amended Answer and Counterclaim, ANTHC states that SCF is advancing

a “‘dual fiduciary’ theory that would, as ANTHC understands it, allow individual directors to

treat their duty of loyalty as subordinate to, or diluted by, a duty of loyalty to SCF” and to

misuse information. ECF No. 21 ¶ 35. It rests this understanding on two faulty premises: first,

that the members of ANTHC’s Board can operate completely divorced from input from the

Congressionally-appointed designating entities that, by law, appoint ANTHC’s Board members.

And second, that ANTHC and SCF are somehow “Each Other’s Primary Competitors” in the

provision of health services to Alaska Natives. Neither is true.

Section 325 makes clear that ANTHC is to be run by Congressionally-appointed

tribal entities. Because entities can operate only through human beings, each entity appoints a



person to sit on the ANTHC Board. On the ANTHC Board, that person is a representative of the

appointing entity—without approval from the designating entity, that person would not be on the

ANTHC Board, and if that person comes to be no longer affiliated with the designating entity,

that person can no longer remain on the ANTHC Board.

ANTHC would have this Court believe that once a regional health entity has

appointed an individual to the ANTHC Board, that individual no longer is a representative of the

designating entity. This flies in the face of Congress’ design, and would deprive ANTHC of the

expertise and experience that Congress intended would be brought to bear on the ANTHC Board.

ANTHC’s position also implies that SCF is challenging the conflict of interest

rules in the Code of Conduct. This is a red herring. When an actual conflict of interest exists,

SCF’s designated directors, as they have done in the past, will follow the protocol in the Code of

Conduct and recuse themselves. What is at issue in this litigation are ANTHC’s blanket

information restrictions, not legitimate instances where a conflict exists.

This leads to the second faulty premise: that ANTHC and SCF are somehow set

up to be competitors, locked in a battle to see who best can deliver healthcare to Alaska Native

people, and that SCF is trying to gain an unfair advantage by insisting that its own board know

information critical to running ANTHC, such as how much it is paying Teuber. That is not the

case. SCF provides different health services than ANTHC and cooperates with ANTHC to

jointly operate ANMC pursuant to the terms of Section 325. Congress wanted the tribal entities

represented on the ANTHC Board to work together, through a consortium, in order to facilitate

the coordination of the delivery of ANMC’s statewide health services. Congress designed the

Consortium as the mechanism whereby the Congressionally-appointed tribal entities could work

collaboratively with each other to achieve the efficient and equitable delivery of ANMC’s

statewide health services. Congress did not intend to create a new entity that would have total

dominion over these kinds of decisions, divorced from the tribal entities and Alaska Natives that

the Consortium serves.

ANTHC’s knee-jerk reaction to see SCF as its competitor, and its assumption that

it can allocate scarce financial resources without input from its constituent members, is troubling

and unfortunate. If ANTHC is permitted to continue to approach its enterprise this way, the

Alaska Native people it serves will lose.



D. The Controversy Is Justiciable

ANTHC claims in its Amended Answer and Counterclaim that certain portions of

this declaratory judgment action are moot because of changes it has made to its Bylaws. That is

not the case. “The burden of establishing mootness rests on the party raising the issue, and [t]he

burden is a heavy one.” Walsh v. Enge, 154 F. Supp. 3d 1113, 1125 (D. Or. 2015) (quotation

marks omitted, alteration in original). There remains a live controversy concerning the legality

of ANTHC’s existing Code of Conduct and Disclosure Policy under Section 325. This is

undisputed.

The fact that, after this lawsuit was filed, ANTHC amended its Bylaws to require

notice of Executive Committee meetings and ratification of Executive Committee actions

underscores that ANTHC’s Bylaws violated Section 325 for almost two years, during which time

the Executive Committee bound ANTHC to Teuber’s new employment contract without Board

approval. SCF is entitled to a declaration that this delegation of power to the Executive

Committee was illegal.

It is well established that “a defendant’s voluntary cessation of a challenged

practice does not deprive a federal court of its power to determine the legality of the practice.”

City of Mesquite v. Aladdin’s Castle, Inc., 455 U.S. 283, 289 (1982). Under this exception to

mootness for “voluntary cessation,” a case become[s] moot if subsequent events made it

absolutely clear that the allegedly wrongful behavior could not reasonably be expected to recur.”

United States v. Concentrated Phosphate Export Assn., 393 U.S. 199, 203 (1968). ANTHC, as

the party asserting mootness, bears the “heavy burden” of convincing the Court “that the

challenged conduct cannot reasonably be expected to start up again.” Friends of the Earth, Inc.

v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 189 (2000) (quotation marks omitted).

VI. CONCLUSION

“Section 325 effected a general restructuring of the means for delivery of health

services to Alaska Natives by authorizing a new consortium for the provision of statewide health

services.” Cook Inlet Treaty Tribes v. Shalala, 166 F.3d 986, 991 (9th Cir. 1999). Congress

designed this consortium to be transparent and inclusive, so that existing regional health entities

could bring their experience and expertise to bear, and so that healthcare could be distributed

equitably. ANTHC’s concentration of power in the Executive Committee and restrictions on



sharing of information violate clear Congressional intent. For the forgoing reasons, the Court

should grant summary judgment to SCF.

DATED: August 16, 2017 MUNGER, TOLLES & OLSON LLP

By: /s/ William D. Temko WILLIAM D. TEMKO, CA Bar #98858 Attorneys for Plaintiff Southcentral Foundation

Appearing pro hac vice DATED: August 16, 2017 DORSEY & WHITNEY LLP By: /s/ Louisiana W. Cutler LOUISIANA W. CUTLER, #9106028 Attorneys for Plaintiff Southcentral Foundation CERTIFICATE OF SERVICE I hereby certify that on the 16th day of August, 2017, a true and correct copy of the foregoing was served on: James Torgerson [email protected] Sarah Langberg [email protected] by electronic means through the ECF system or if not confirmed by ECF, by first class mail. /S/ Louisiana W. Cutler Dorsey & Whitney LLP


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