$600 Million Breach-Of-Trust Case Before Supreme Court, Again - NIEA Fall Convention
February 23rd, 2009
By Kathy Helms
WINDOW ROCK — Navajo Nation President Joe Shirley Jr. will join Attorney General Louis Denetsosie and the Nation’s outside attorneys, Paul Frye and Carter Phillips, for oral arguments today before the U.S. Supreme Court in the Navajo Nation’s $600 million breach-of-trust case.
This is the second time the 10-year-old case, Navajo Nation v. United States, is before the Supreme Court. In March 2003, the court ruled 6-3 against Navajo, saying it did not prove a breach of trust under the Indian Mineral Leasing Act, which gives tribes control over their trust assets.
In September 2007, the U.S. Court of Appeals reversed a federal claims court decision and found that the U.S. Department of the Interior breached its trust responsibility by not disclosing critical information to the Navajo Nation regarding coal royalty negotiations with Peabody Coal in 1987.
The appeals court found the Navajo Nation had a “money-mandating claim” against the federal government and upheld its assertion that there is a substantial network of laws and regulations to establish specific trust responsibilities.
“Four former Interior secretaries have filed a friend of the court brief on behalf of Navajo,” Hardeen said, including Cecil D. Andrus, Bruce Babbitt, Manuel Lujan Jr. and Stewart L. Udall. Eight law professors, attorneys general for New Mexico, Utah and Arizona, and the National Congress of American Indians also have filed supporting briefs.
“A lot of people are going to be watching this one,” Hardeen said.
The Navajo Nation first leased land on Black Mesa to Peabody Coal and its predecessor in 1964 with approval by Interior. The lease established a schedule of royalty payments not greater than 37.5 cents per ton with a provision for a “reasonable adjustment” by the Interior secretary in 20 years — 1984. That rate was deemed an “inequitable deal,” and “substantially lower” than the 12.5 percent minimum royalty set by Congress in 1977 for coal mined on federal land.
In 1984, Navajo asked Interior Secretary William Clark to adjust the royalty payment. About three months later, Navajo Area Director Donald Dodge adjusted the rate to 20 percent. However, in July 1985 Peabody requested Interior Secretary Donald Hodel, who succeeded Clark, postpone the decision on the 20 percent royalty rate or rule against it.
The undisputed facts of the case state that Peabody retained former Interior executive Stanley Hulett, a former aide and friend of Hodel’s, to represent the company before him. The court found that Hulett met with the secretary without Navajo being present, and that shortly afterward Hodel signed a memorandum prepared by Peabody on Interior letterhead that directed the company and the Nation to return to the bargaining table. The Nation, facing the alternative of receiving unadjusted flat royalties, was compelled to agree to the 12.5 percent royalty rate.
“As a result of these actions, Peabody Coal was able to reduce its royalty payments by nearly 50 percent … Thus, the Navajo were deprived of hundreds of millions of dollars over the course of the lease,” the former Interior secretaries wrote in their brief.
“Interior Department regulations specifically require the department to act in the Navajos’ best interest,” they said.
“The Interior Department’s conduct in this case fell far short of the standards that department officials normally observe. As the Court of Federal Claims observed, the department has ‘no plausible defense’ for the actions at issue in this case.”
In a brief filed in December 2008 by Peabody Western Coal Co. and Southern California Edison in support of the United States, the parties state that the 12.5 percent coal royalty rate approved by the Secretary of the Interior “is, and has been, the customary and prevailing rate in federal and Indian coal leases for more than 20 years.”
They claim that the court’s previous decision “should have ended this case. There the court decided that the tribe is not entitled to recover damages relating to the Secretary’s approval of the coal lease amendments at issue here.”
Because the Indian Mineral Leasing Act does not contain “any trust language with respect to coal leasing,” the court held that it imposes no fiduciary duties, they said.
After Dodge issued an opinion letter in June 1984 recommending the 20 percent royalty rate, the parties state, he then sent two separate letters: one to the tribe explaining that the recommendation was made “in consultation with the Navajo Nation’s Minerals Department and the Department of Justice,” and another to Peabody which omitted that language.
The Navajo Nation will argue today that, among other things, the Navajo-Hopi Rehabilitation Act of 1950, which addresses the leasing of tribal land, specifically requires the federal government to consult with and keep its Native American beneficiaries informed in dealing with their mineral resources as part of tribal self-determination.
Peabody and Edison, in their brief of support for the United States, contend, however, that the court “squarely rejected the tribe’s economic argument in Navajo I, and there is nothing about the present context that would yield a different result.”
The former Interior secretaries said the Interior Department not only violated its duty of candor to be truthful but also failed to communicate facts that the Navajo Nation needed to know for its protection in dealing with third parties. “This conduct is indefensible,” they wrote.
The National Congress of American Indians said the Interior secretary cannot have it both ways.
NIEA Fall Convention
The National Indian Education Association (NIEA) marks its 40th anniversary during the 2009 NIEA Convention, Milwaukee, Wisconsin, October 22-25, 2009.
This is a unique opportunity to showcase your talent before a membership of 3,000 plus educators, tribal leaders, administrators and all education community from all across Indian Country.
You may view the NIEA website at www.niea.org/ for detailed information.
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