US Tenth Circuit Court of Appeals Rules Against Muscogee Nation, HUD Prevails in Investment Dispute

The Muscogee (Creek) Nation on October 30 did not receive the news it was hoping for, when the U.S. Tenth Circuit Court of Appeals upheld earlier rulings by the District Court in its case against the U.S. Department of Housing and Urban Development (HUD).

The Tenth Circuit justices heard oral arguments last year, when attorneys for the Nation and HUD clashed over HUD’s authority to regulate interest from the Nation’s investments under Native American Housing and Self-Determination Act (NAHASDA) block grants.

In Muscogee (Creek) Nation v. United States Department of Housing and Urban Development et al., the U.S. District Court for the Eastern District of Oklahoma dismissed the Nation’s challenge to a two-year limit after which any interest from NAHASDA grants had to be returned to HUD.

The District Court also rejected the Nation’s demand for a return of some $1.3 million of earned interest it had sent HUD earlier after the agency warned the Nation it had exceeded the two-year limit. The current appeal followed.

The Tenth Circuit noted that a NAHASDA statute permits tribes to “invest grant amounts for the purposes of carrying out affordable housing activities in investment securities and other obligations as approved by the Secretary [of HUD].” Regulations drafted later established procedures for authorization to invest and state that “investments under this section may be for a period no longer than two years.”

A three-judge panel of the appeals court said it is “not persuaded that a two-year investment window is ‘irreconcilable’ with NAHASDA’s intent to recognize the right of Indian self-determination and tribal self-governance,” despite the Nation’s assertion that the time limit is constrained by NAHASDA’s “guiding principle” concerning those rights.

The court also noted that the Comptroller General said “any interest earned on grant funds when those funds are not used for authorized grant purposes [i.e., past the two-year period, the court stated] must be considered interest earned on grant advances, and hence, belongs to the United States.”

The Tenth Circuit upheld the District Court’s decision to grant HUD’s request to dismiss the case based in part on the federal government’s sovereign immunity.

In affirming the District Court’s decision to dismiss the case, the justices said that HUD could limit the time period for investments and concluded that “HUD was authorized—indeed, required—to demand remittance of interest earned in violation of this regulation” and that the Nation wasn’t entitled to recoup the $1.3 million in interest it had paid to HUD.

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